##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION



Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT of 1934


For the fiscal year ended January 31,
2004

Commission file number: 000-50303

Hayes Lemmerz International, Inc.

(Exact name of Registrant as Specified in its
Charter)


|                                                                                             |  |                                     
|-------------------------------------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                                                     |  | 32-0072578                          
|(State or Other Jurisdiction of
    Incorporation or Organization)                           |  | (I.R.S. Employer Identification No.)
|                                                                                            
|15300 Centennial Drive, Northville,
    Michigan(Address of Principal Executive
    Offices) |  | 48167(Zip Code)                     

Registrants telephone number, including
area code:

(734) 737-5000


Securities Registered Pursuant to
Section 12(g) of the Act:

Common Stock, par value $0.01 per
share


Securities Registered Pursuant to
Section 15(d) of the Act:

10.5% Senior Notes Due 2010


Indicate by check
mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days.     Yes þ          No o

Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this
Form 10-K.     o

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in Rule 12(b)-2 of the
Act).     Yes þ     No o

APPLICABLE ONLY TO
REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

Indicate by check
mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the
Act subsequent to the distributions of securities under a plan
confirmed by a
court.          Yes þ          No o

The aggregate
market value of the registrants common stock held by
non-affiliates was $339.0 million based on the reported
last sale price of common stock on July 31, 2003, which is
the last business day of the registrants most recently
completed second fiscal quarter.

The number of
shares of Common Stock outstanding as of April 6, 2004 was
37,720,970 shares.

DOCUMENTS INCORPORATED BY REFERENCE

|                                                                                                                                                                                                                    |  |                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|Document Description                                                                                                                                                                                                |  | Form 10-K Part              
|                                                                                                                                                                                                                    |  |                             
|Portions of the Registrants notice of
    annual meeting of shareholders and proxy statement to be filed
    pursuant to Regulation 14A within 120 days after
    Registrants fiscal year end of January 31, 2004 |  | Part II, Item 5
    Part III



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HAYES LEMMERZ INTERNATIONAL, INC.

FORM 10-K ANNUAL REPORT


TABLE OF CONTENTS

|                                                  |  |                                                                                                        |  |      |    | 
|------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                  |  |                                                                                                        |  | Page |   
|                                                  |  |                                                                                                        |  |      |   
|PART I                                           
|Item 1.                                           |  | Business                                                                                               |  |      | 3  | 
|Item 2.                                           |  | Properties                                                                                             |  |      | 17 | 
|Item 3.                                           |  | Legal Proceedings                                                                                      |  |      | 19 | 
|Item 4.                                           |  | Submission of Matters to a
    Vote of Security Holders                                                |  |      | 22 | 
|                                                 
|PART II                                          
|Item 5.                                           |  | Market for Registrants
    Common Equity and Related Stockholder Matters                              |  |      | 22 | 
|Item 6.                                           |  | Selected Financial Data                                                                                |  |      | 24 | 
|Item 7.                                           |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations              |  |      | 25 | 
|Item 7A.                                          |  | Quantitative and Qualitative
    Disclosures about Market Risk                                         |  |      | 49 | 
|Item 8.                                           |  | Consolidated Financial
    Statements and Supplementary Data                                           |  |      | 49 | 
|Item 9.                                           |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure               |  |      | 49 | 
|Item 9A.                                          |  | Controls and Procedures                                                                                |  |      | 49 | 
|                                                 
|PART III                                         
|Item 10.                                          |  | Directors and Executive
    Officers of the Registrant                                                 |  |      | 50 | 
|Item 11.                                          |  | Executive Compensation                                                                                 |  |      | 54 | 
|Item 12.                                          |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters |  |      | 54 | 
|Item 13.                                          |  | Certain Relationships and
    Related Transactions                                                     |  |      | 54 | 
|Item 14.                                          |  | Principal Accountant Fees
    and Services                                                             |  |      | 54 | 
|                                                 
|PART IV                                          
|Item 15.                                          |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                                   |  |      | 54 | 
|Amendment No. 2 and Waiver to Credit Agreement   
|Computation of Ratio of Earnings to Fixed Charges
|Code of Ethics                                   
|Preferability Letter of KPMG LLP                 
|Subsidiaries of the Company                      
|Consent of KPMG LLP                              
|Powers of Attorney                               
|Section 302 Certification of Curtis J. Clawson   
|Section 302 Certification of James A. Yost       
|Section 906 Certification of Curtis J. Clawson   
|Section 906 Certification of James A. Yost       



FORWARD-LOOKING STATEMENTS

Unless otherwise indicated, references to the
Company mean Hayes Lemmerz international, inc., and
its subsidiaries, and references to a fiscal year means the
Companys year commencing on February 1 of that year and
ending January 31 of the following year (e.g., fiscal 2003
means the period beginning February 1, 2003, and ending
January 31, 2004). This Annual Report on Form 10-K,
including Managements Discussion and Analysis of
Financial Condition and Results of Operations, includes
forward-looking statements. All statements other
than statements of historical facts included in this Annual
Report on Form 10-K regarding the prospects of the
Companys industry and the Companys prospects, plans,
financial position and business strategy, may constitute
forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of
forward-looking terminology such as may,
will, expect, intend,
estimate, anticipate, plan,
foresee, believe or
continue, or the negatives of these terms or
variations of them or similar terminology. Although the Company
believes that the expectations reflected in these
forward-looking statements are reasonable, the Company can give
no assurance that these expectations will prove to be correct.
All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on the
Companys behalf are expressly qualified in their entirety
by the cautionary statements included in this document. These
forward-looking statements speak only as of the date

1



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of this Annual Report on Form 10-K. The
Company will not update these statements unless the securities
laws require the Company to do so. Important factors that could
cause actual results to differ materially from the
Companys expectations are disclosed in this Annual Report
on Form 10-K, including in conjunction with the
forward-looking statements included in this Annual Report on
Form 10-K including, but not limited to:




| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | Decreased demand in the automotive
    industry;                                                           
|
| |  | Changes in the automotive industry, including
    increased consolidation and cost reduction;              
|
| |  | Cyclical nature of the automotive
    industry;                                                            
|
| |  | Dependence on major customers;                                                                             
|
| |  | Pricing pressure from the Companys
    customers;                                                         
|
| |  | Competition in the automotive supply
    industry;                                                         
|
| |  | Dependence on key personnel;                                                                               
|
| |  | Effects of unexpected equipment failures,
    delivery delay or catastrophic loss;                         
|
| |  | Exposure to product liability and warranty
    claims;                                                     
|
| |  | Protection of the Companys intellectual
    property and potential infringement upon rights of
    others;
|
| |  | The Companys involvement in
    investigations and legal proceedings;                                     
|
| |  | Pending SEC investigation;                                                                                 
|
| |  | Effects of the Companys substantial
    level of debt on its operations;                                  
|
| |  | The Companys inability to take certain
    actions due to restrictions in its debt agreements;            
|
| |  | Effects of the Companys bankruptcy
    proceedings;                                                       
|
| |  | The Companys ability to complete
    implementation of operational improvements;                          
|
| |  | The Companys ability to execute its
    strategic plans;                                                  
|
| |  | The Companys ability to successfully
    launch new products;                                             
|
| |  | Increased cost of supplies or raw
    materials;                                                           
|
| |  | Technological or regulatory changes that could
    render the Companys products obsolete;                 
|
| |  | Effects of political, regulatory and legal
    conditions on the Companys international
    operations;   
|
| |  | The Companys and its customers
    relations with employees;                                             
|
| |  | Exposure to variable interest rates and
    foreign currency fluctuations;                                 
|
| |  | Exposure to environmental
    liabilities;                                                                 
|
| |  | Influence by significant
    stockholders;                                                                 
|
| |  | Lack of comparable financial data due to the
    adoption of fresh start accounting;                       
|
| |  | Global financial and economic
    instability.                                                             

2



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PART I






|        |         
|------- | --------
|Item 1. | Business

General

Unless otherwise indicated, references to
Company mean Hayes Lemmerz International, Inc.
and its subsidiaries, and references to fiscal year means the
Companys year commencing on February 1 of that year and
ending on January 31 of the following year (i.e., fiscal
2003 refers to the period beginning February 1, 2003
and ending January 31, 2004, fiscal 2002 refers
to the period beginning February 1, 2002 and ending
January 31, 2003 and fiscal 2001 refers to the
period beginning February 1, 2001 and ending
January 31, 2002).

The Company is a leading supplier of wheels,
wheel-end attachments, aluminum structural components and
automotive brake components. The Company is the worlds
largest manufacturer of automotive wheels. In addition, the
Company also designs and manufactures wheels and brake
components for commercial highway vehicles, and powertrain
components and aluminum non-structural components for the
automotive, commercial highway, heating and general equipment
industries.

Business Overview

Originally founded in 1908, the Company is a
leading worldwide producer of aluminum and steel wheels for the
light vehicle market. The Company is a leading provider of steel
wheels for the commercial highway market. The Company is also a
leading supplier in the high growth market for lightweight
aluminum products, including suspension, brake and powertrain
components. The Company has a global footprint with
44 facilities located in 14 countries around the
world. The Company sells products to every major North American,
Japanese and European manufacturer of passenger cars and light
trucks as well as more than 300 commercial highway vehicle
customers throughout the world. The Companys products are
presently on 16 of the top 20 selling platforms for
passenger cars in the United States. In fiscal 2003, the Company
had net sales of $2.1 billion, with approximately 48% of
the Companys net sales for that period derived from
international markets, and the Company had earnings from
operations in fiscal 2003 of $62.0 million (which includes
the impact of certain gains and expenses related to its
emergence from Chapter 11 proceedings).

On December 5, 2001, Hayes Lemmerz
International, Inc. (Old Hayes), 30 of the
Companys wholly owned domestic subsidiaries and one of the
Companys wholly owned Mexican subsidiaries filed voluntary
petitions under Chapter 11 of the Bankruptcy Code with the
U.S. Bankruptcy Court in the District of Delaware (the
Bankruptcy Court). On May 12, 2003, the
Bankruptcy Court confirmed the Companys modified first
amended joint plan of reorganization (the Plan of
Reorganization). Under the Plan of Reorganization, HLI
Holding Company, Inc. (Holdco) was formed as a
new holding company, with no business operations and no assets
or liabilities, other than immaterial amounts in connection with
its formation.

On June 3, 2003 (the Effective
Date), the Company emerged from bankruptcy and, under the
Plan of Reorganization, Old Hayes was merged with and into HLI
Operating Company, Inc., an indirect subsidiary of Holdco
(HLI), with HLI continuing as the surviving
corporation. As a result of the merger, all of the assets and
businesses of Old Hayes are now owned and operated by HLI.
Immediately following the merger, Holdco was renamed Hayes
Lemmerz International, Inc. (Hayes). All of
HLIs common stock is held by HLI Parent Company, Inc.
(HLI Parent Co.), which is wholly owned by Hayes.
Hayes and HLI Parent Co. remain holding companies that do not
conduct any business operations. For further discussion of the
Companys emergence from Chapter 11, see Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Business,
Chapter 11 Filings and Emergence from Chapter 11.

As a result of the application of fresh start
accounting on May 31, 2003, and in accordance with
SOP 90-7, the post-emergence financial results of the
Company for the period ending January 31, 2004 are
presented as the Successor and the pre-emergence
financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor.
Comparative financial statements do not straddle the Effective
Date because in effect the Successor Company represents a new
entity.

3



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Industry Trends

The Company believes there are a number of
important trends in the automotive parts industry that the
Company has benefited from in the past and will continue to
benefit from in the future. These trends include:

Increasing Requirements for Global
Capabilities.Automotive OEMs are
focused on expanding their business operations globally to
capitalize on markets that are experiencing high rates of growth
or that have low production costs. As a result, suppliers are
being required to operate in these same global markets to obtain
new business from their customers. The Company believes
automotive OEMs favor suppliers that have global operations to
supply low-cost, high-quality products, as well as suppliers
that have the ability to supply parts for a particular platform
to multiple production facilities around the world. The Company
believes that few suppliers are truly global and those that are
have a competitive advantage.

Growing Demand for Full Service
Suppliers.Automotive OEMs are
increasingly outsourcing a greater number of vehicle components
to their suppliers, and increasingly require that their
suppliers have the capabilities to design and engineer the
components they manufacture for the OEMs to allow the OEMs to
focus on overall vehicle design, development and marketing. The
Company believes automotive OEMs are awarding new business to
those suppliers that support the full range of design and
engineering services required to provide high quality,
technologically advanced products under shortened product
development timetables.

Increasing Use of Aluminum in
Vehicles.Automotive OEMs are focused
on increasing the fuel efficiency of vehicles while maintaining
safety and comfort. Light metals such as aluminum provide
automotive OEMs with a way to materially reduce the overall
weight of the vehicle and improve fuel efficiencies. Aluminum
penetration in the North American wheel market is approximately
62%, as automotive OEMs have recognized both the weight
efficiencies of aluminum and its favorable design
characteristics. Aluminum wheel penetration in Europe is
approximately 33% and the Company expects it to grow
significantly as the European market looks to both improve fuel
efficiency and provide design differentiation. The most
significant growth area in the market for aluminum vehicle parts
is expected to be in the suspension components area, where the
penetration of aluminum currently is less than half that of
wheels, even though aluminum provides significant weight saving
opportunities to automotive OEMs.

The Company derived approximately half of fiscal
2003 net sales on a worldwide basis from Ford,
DaimlerChrysler and General Motors and their subsidiaries. The
Companys sales levels and margins could be adversely
affected as a result of pricing pressures caused by new
competitors in low-cost foreign markets such as China. These
factors led to selective resourcing of future business to
competitors in the second quarter of fiscal 2003. Additionally,
these customers have been experiencing decreasing market share
in North America, which could result in lower sales volumes for
Hayes. While the Companys net sales are continually
affected by pressure from its major customers to reduce prices,
the Companys emphasis on reduction of production costs,
increased productivity and improvement of production facilities
has enabled the Company to respond to this pressure.

Competitive Strengths

The Company believes that the following
competitive strengths are instrumental to its success:

Leading Market Positions Across Products and
Markets.The Company is a leading
supplier of automotive wheels used by OEMs in North America and
in Europe. The Company is also a leading supplier of lightweight
aluminum suspension, powertrain and brake components.

Diversified Base of
Business.The Companys
competitive position in the market and opportunities for growth
are driven by a diversified base of business that capitalizes on
the following competitive advantages:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Global
    Presence The Company is a
    leading producer of aluminum and steel wheels, with 44
    manufacturing and engineering facilities in 14 countries.
    The Companys manufacturing presence on five continents
    gives it an important competitive advantage in the global
    sourcing of wheels by OEM customers. The Company is the only
    direct supplier to OEMs (referred to as a
    Tier 1 supplier) that

4



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | has significant automotive wheel operations in
    both the U.S. and Europe. In addition to the Companys
    global capabilities in automotive wheels, the Company has
    recently opened a sales and support center in Germany to support
    business development initiatives for cast aluminum suspension
    components in Europe and Asia.                                                                                                                                                                                                              
|
| |  | Broad Customer
    Base The Company believes
    that it supplies almost every major automotive manufacturer in
    the world and enjoys long-standing relationships with many
    automotive OEMs such as Ford, DaimlerChrysler, General Motors,
    Nissan, BMW, Renault, Volvo and Volkswagen. The Company supplies
    customers on a worldwide basis from facilities in North America,
    Europe, Asia Pacific, Latin America and South Africa. The
    Companys Commercial Highway business supplies more than
    300 customers throughout the world.
|
| |  | Diverse Product
    Portfolio The Company
    provides automotive OEM customers with a diverse range of
    products. The Companys substantial product breadth
    provides a competitive advantage over its competitors who
    typically focus on a narrower product range in limited
    geographic markets. The Company believes a diverse product
    portfolio provides critical mass and helps meet the needs of
    customers who are trying to streamline their supplier base.                                                                      

The Company believes its diversified customer
base and global capabilities are unique in the industry.

The Company currently conducts business in three
operating segments: Automotive Wheels, Components and Other. The
Automotive Wheels segment includes cast aluminum wheels and
fabricated steel and aluminum wheels. The Components segment
includes suspension components, brake components and powertrain
components. The Other segment includes commercial highway
products and its aftermarket division.

Low-Cost Provider.To meet the Companys customers demands for the
highest quality, lowest cost product delivered globally, the
Company has established manufacturing facilities in the Czech
Republic, Turkey, Brazil, Mexico, South Africa, Thailand and
India. The ability to produce products at a lower cost, close to
the customer, gives the Company an advantage over competitors
without the Companys breadth of global facilities. In the
next two years, the Company presently intends to expand its low
pressure aluminum wheel casting capabilities in Thailand and the
Czech Republic to serve customers in Europe and Asia. The
Company recently acquired a cast aluminum wheel plant located in
Chihuahua, Mexico formerly operated as part of a joint venture
in which the Company owned a minority interest. Following the
Companys planned refurbishment and expansion of the plant,
it will serve the North American wheel market utilizing low
pressure casting technology. The Company presently anticipates
that most future capacity expansion will be in countries with
low production costs.

Strong OEM
Relationships.The Companys
position as a supplier with full-service global manufacturing
capabilities has enabled it to create long-standing
relationships with its customers, including automotive OEMs such
as Ford, DaimlerChrysler, General Motors, Nissan, BMW, Renault,
Volvo and Volkswagen. The Companys strong relationships
with automotive OEMs have also allowed it to expand the business
globally as its customers have moved into new markets and
product niches.

New Product
Innovation.The Company is a leader in
new product development. The Company has developed many new
products to meet customer needs for lighter weight vehicles to
improve fuel economy as well as ride and handling. Recent
innovations include a fabricated steel wheel that is both
lighter than a standard steel wheel and significantly less
expensive than an aluminum wheel, with similar styling
capabilities to those of an aluminum wheel. The Company has also
developed a method of casting large one-piece aluminum
suspension components and the Company believes it is one of the
few suppliers capable of casting these components.

Full Service
Capabilities.The Company has
full-service capabilities in all of the product segments,
including advanced design and engineering, value-added casting
processes and machining, which allow the Company to provide its
customers with total product solutions. The Company is
recognized for technology and process innovation.

5



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Leading Position in Lightweight Aluminum
Wheels and Components.The Company
believes that it is the number one supplier of aluminum wheels
globally and is positioned for continued growth as the
penetration of aluminum in both wheels and automotive components
continues to increase in Europe and the rest of the world. From
1990 to 2000, aluminum content in light vehicles grew at an
average rate of 4.9% per year in North America, Europe and
Japan. The Company believes that its global presence and
technological expertise in aluminum have made the Company the
leading supplier of aluminum suspension components, with
significant growth opportunities.

New and Experienced Management
Team.On August 1, 2001, the
Company appointed Curtis Clawson as its new President and Chief
Executive Officer. Since his arrival, Mr. Clawson has put
in place an experienced management team with over 100 combined
years of automotive and lean manufacturing experience at
companies including AlliedSignal, ArvinMeritor, Bosch, Ford,
General Motors and Honeywell. Key management changes include the
hiring of new Presidents for three of the four North American
business units as well as a new Chief Financial Officer and a
new Chief Information Officer. Under this teams
leadership, the Company has significantly improved the
operations of its business and positioned the Companys
business for continued growth and ongoing financial strength.
Specifically, since the beginning of fiscal 2002, management has:



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | rationalized capacity and production, including
    the closing of four facilities (including the recently announced
    Howell plant closure);                                             
|
| |  | introduced lean manufacturing and Six Sigma
    initiatives (initiatives designed to improve profitability and
    customer satisfaction by eliminating variability, defects and
    waste);
|
| |  | significantly improved internal controls and
    centralized certain aspects of the accounting and finance
    functions;                                                                   
|
| |  | successfully launched a number of new products
    and programs; and                                                                                                                        
|
| |  | re-established strong relationships with
    customers and won a significant number of new contracts.                                                                                       

Business Strategy

The Company believes it is well positioned for
growth in sales and operating income through a strategy based on
the following:

Leverage Market Leading Positions and Global
Capabilities.The Company believes its
leading market positions reflects its reputation for quality and
excellence in the global light vehicle and commercial highway
markets for wheels and other products, including suspension,
powertrain and brake components. The Company believes it
benefits from its leadership position in product and process
technologies that support its focus on high value-added content,
particularly regarding safety-critical products, such as
suspension products. The Companys position as the largest
aluminum and steel wheel producer combined with global
capabilities give it a strong base to use such breadth and scope
to provide maximum value to customers.

As emerging markets develop their manufacturing
capabilities and infrastructure, the demand for vehicles, and
the capability to build them locally increases, the
Companys facilities in emerging market countries position
it well in these local markets both to take advantage of the low
costs of production and to supply the local automotive markets
as they grow at rates generally expected to be faster than in
North America and Europe. For example, the Companys
facility in Thailand produces wheels that are shipped to
Japanese OEMs and wheels that are sold in the Thai markets.

Expand Low Cost Production
Capabilities.To meet the
Companys customers demands for the highest quality,
lowest cost product delivered globally, the Company has
established manufacturing facilities in a number of countries
around the globe that have low production costs. The Company
currently has facilities in the Czech Republic, Turkey, Brazil,
Mexico, South Africa, Thailand and India. The ability to produce
product at a lower cost, close to the customer, gives the
Company an advantage over competitors without its breadth of
global facilities. Through continued investment in countries
with low production costs, the Company intends to continue to
enhance its global market position while minimizing its costs.
In the next two

6



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##### Table of Contents



years, the Company presently intends to expand
its low pressure aluminum wheel casting capabilities in Thailand
and in the Czech Republic to serve customers in Europe and Asia
and to refurbish and expand the cast aluminum wheel plant it
recently acquired in Chihuahua, Mexico so that it will serve the
North American wheel market utilizing low pressure casting
technology. The Company presently anticipates that most future
capacity expansion will be in countries with low production
costs.


Enhance the Companys Strong Customer
Relationships.The Company is focused
on continuing to strengthen its customer relationships through
increased quality, high levels of customer service and
operational excellence, all of which will allow it to continue
to provide a high quality product to customers at a low price.
The Companys management team has created a culture that is
focused on providing its customers with high quality service and
technical support and this is demonstrated in its continuing
ability to obtain new business and expand customer
relationships. In addition, the Company actively leverages its
strong OEM relationships in Europe to increase its market share
with Asian and European transplant OEMs in North America.

Continue Leadership in New Product Innovation
and Process Development.The Company
believes that it has a track record of developing product and
manufacturing process innovations. For example, the Company
recently developed a fabricated steel wheel that is both
significantly lighter than a standard steel wheel and
significantly less expensive than an aluminum wheel, with
styling capabilities similar to an aluminum wheel. The Company
is also one of the only suppliers globally using the vacuum
riserless casting/pressure riserless casting (VRC/
PRC) technology that allows for the casting of complex
aluminum structural crossmembers that are lighter and more
structurally sound than conventionally cast crossmembers. The
Company intends to continue its efforts to develop innovative
wheel, brake and other suspension products and manufacturing
processes to better serve customers globally and improve product
mix and profit margins.

Expand the Companys Product Offerings of
High Growth Aluminum Components.The
Company continues to develop new aluminum components using its
advanced technology and processes. The Company is focused on
increasing its capabilities in the production of high volume
aluminum components in order to benefit from significant growth
opportunities as customers focus on weight reduction and fuel
efficiency. Although U.S. and Western European OEMs have
significantly increased their reliance on aluminum products in
their effort to reduce weight and increase fuel efficiency,
there remain a number of opportunities to increase the use of
aluminum components by OEMs and thereby increase its market
penetration. Since 1999, in North American light vehicles, the
use of cast aluminum suspension crossmembers, cast aluminum
control arms and cast aluminum knuckles has grown 6.3%, 9.5% and
2.7%, respectively, and the Company expects it to continue to
grow. In addition, many Japanese transplant OEMs still rely
heavily on lower-cost iron components and the Company believes
that, as its capabilities to produce low-cost aluminum
components expand, its ability to sell more aluminum components
to Japanese transplant OEMs will increase.

Focus on Operational
Excellence.The Company continuously
implements strategic initiatives designed to improve product
quality while reducing manufacturing costs. As part of its
turnaround process, the Company has implemented a broad range of
initiatives that have resulted in substantially improved
operating performance. The Company continues to focus on
opportunities to improve operating income including:
(a) further rationalization of manufacturing capacity;
(b) streamlining of marketing and general and
administrative overhead; (c) continued implementation of
lean manufacturing and Six Sigma initiatives; (d) efficient
investment in new equipment and technologies and the upgrading
of existing equipment; and (e) continued improvement of its
internal controls and centralization of certain aspects of its
accounting and finance functions. The Companys management
team is focused on maximizing the Companys current asset
base to improve its operational efficiency while also adapting
to the needs of customers and the market.

The Company may be unable to successfully
implement its business strategies due to a weakening of the
economy, changes in the automotive industry or other factors.

Products

The Companys products consist of the
following products for passenger vehicles and light trucks:
(a) automotive wheels, including both cast aluminum and
fabricated aluminum and steel wheels; (b) suspension
components, such as undercarriage components, structural
crossmembers, subframes, engine

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cradles and axle components; (c) wheel-end
attachments and assemblies, such as steering knuckles, spindles
and control arms; (d) brake components, such as rotors and
drums; and (e) powertrain components, such as intake
manifolds and exhaust manifolds. The Company also manufactures
wheels and brakes for commercial highway vehicles.




| |                     
| | --------------------
| | Cast Aluminum Wheels

The Company designs, manufactures and distributes
a full line of cast aluminum wheels to automotive OEMs in North
America, Europe, South America, South Africa and Asia. The
Company manufactures one-piece aluminum wheels including wheels
with bright finishes such as polishing, bright machining and
bright paints. With the exception of a limited number of cast
aluminum wheels manufactured by Toyota and Ford, there is no
significant manufacturing of cast aluminum wheels by OEMs. The
Companys cast aluminum wheels are produced and sold in
North America, Europe, South America, South Africa and Asia. The
Company believes it will benefit in this product category from
the industry trend towards using lightweight materials to reduce
overall vehicle weight and improve fuel efficiency.

North America.The
Company designs, manufactures and distributes a full line of
cast aluminum wheels to OEMs in North America. The Company is a
leading supplier of cast aluminum wheels to automotive OEMs in
North America.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.In fiscal
    2003, the Company sold substantially all of its North American
    cast aluminum wheel production to DaimlerChrysler, Ford and
    General Motors for use on vehicles produced in North America.
    The remainder of its cast aluminum wheels was sold to Japanese
    transplants in the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Competition.The
    Companys primary competitor in the North American cast
    aluminum wheel market is Superior Industries International Inc.
    The Company also competes with Amcast Industrial Corp., American
    Racing Equipment, Inc., Alcoa Inc. and several foreign
    suppliers operating in the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | Manufacturing.The
    Company has four cast aluminum manufacturing facilities in North
    America, located in Howell, Michigan; Gainesville, Georgia;
    Huntington, Indiana; and La Mirada, California. The
    Company primarily uses gravity casting technologies to
    manufacture cast aluminum wheels in North America. The Company
    recently acquired a cast aluminum wheel plant located in
    Chihuahua, Mexico to serve the North American market, which
    following expansion and refurbishment of the plant, will utilize
    low pressure casting technology. This technology is the same as
    is used in Europe and is preferred by some of the Companys
    customers. Engineering, research and development for North
    American cast aluminum operations are performed at its
    Northville, Michigan facility.

Europe.The Company
designs, manufactures and distributes a full line of cast
aluminum wheels to OEMs in the passenger car and light truck
segments of the European automotive industry. The Company is a
leading supplier of cast aluminum wheels to automotive OEMs in
the European market. In Europe, the Companys OEM customers
demand a wide variety of styles and sizes of cast aluminum
wheels, and it maintains substantial capabilities to meet such
demand. The Company also maintains direct computer links with
several customer locations in Europe to determine customer needs
and streamline the design and approval process and reduce
product development lead time.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.Substantially all of the Companys European cast aluminum
    wheels are sold to BMW, DaimlerChrysler, Fiat, Ford, General
    Motors, Honda, Nissan, Peugeot, Porsche, Renault, Toyota,
    Volkswagen and Volvo.                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | Competition.The
    Companys primary competitors in the European cast aluminum
    wheel market for passenger cars are Ronal GmbH, Borbet
    Leichtmetallrader and ATS Leichtmetallrader. The European cast
    aluminum wheel market is more fragmented than that of North
    America, with numerous producers possessing varying levels of
    financial resources and market positions. In 2002, the
    installation rate of cast aluminum wheels in Europe was
    significantly lower than in North America. As a result of
    anticipated consolidation of small local manufacturers across
    the European community and the expected

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | increasing demand for cast aluminum wheels among
    European consumers and OEMs, the Company believes that, over the
    next several years, the number of cast aluminum wheel
    manufacturers in Europe likely will decline and the remaining
    producers will increase their market shares. As a result of its
    position in Europe and its advanced engineering and technology,
    the Company believes that it is well positioned to capitalize on
    the changes in the European markets.                                     
|
| | Manufacturing.The
    Company has five cast aluminum manufacturing facilities in
    Europe, which are located in Barcelona, Spain;
    Dello, Italy; Campiglione Fenile, Italy; Hoboken,
    Belgium; and Ostrava, Czech Republic. The Company utilizes low
    pressure casting technologies to manufacture aluminum wheels in
    its European facilities. Engineering, research and development
    for the Companys European cast aluminum wheel operations
    are performed at its Dello, Italy and Hoboken, Belgium
    facilities.

South America, South Africa and
Asia.The Company designs,
manufactures and distributes a full line of cast aluminum wheels
to OEMs in South America, South Africa and Asia. The Company
owns 100% of Hayes Lemmerz Japan Limited, a Japanese corporation
that provides sales, engineering and service support for the
Japanese wheel market.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys largest customers for South American cast
    aluminum wheels are Ford, General Motors, Renault and
    Volkswagen. The largest customers for the Companys South
    African cast aluminum wheels are BMW, DaimlerChrysler, Dotz and
    Volkswagen. The largest customers for its Asian cast aluminum
    wheels are Isuzu, Mitsubishi and Toyota.                                                                                                                                                                                                                                                                                      
|
| | Competition.The
    Companys primary competitors in the South American cast
    aluminum wheel market for passenger cars are
    Italmagnesio S.A. and Mangels Industrial S.A. The
    Company competes in the South African cast aluminum wheel market
    for passenger cars with Tiger Wheels Limited. Its primary
    competitor in the Asian cast aluminum wheel market for passenger
    cars is Enkei International, Inc.                                                                                                                                                                                                                                     
|
| | Manufacturing.The
    Company has one cast aluminum manufacturing facility in South
    America, which is located near Sao Paulo, Brazil. In South
    Africa, the company has one cast aluminum wheel manufacturing
    facility located near Johannesburg, South Africa. The Company
    has one cast aluminum wheel manufacturing facility in Asia,
    which is located near Bangkok, Thailand. Engineering, research
    and development for the Companys South American, South
    African and Asian cast aluminum wheel operations is currently
    performed at its facilities located in Dello, Italy;
    Johannesburg, South Africa; and Hoboken, Belgium.



| |                  
| | -----------------
| | Fabricated Wheels

The Company designs, manufactures and distributes
fabricated steel and aluminum wheels to automotive OEMs in North
America, Europe and South America. The Companys fabricated
wheel products include steel and aluminum wheels that can be
made in drop-center, bead seat attached and clad designs, as
well as chrome and full-face steel wheels. The Company has also
recently developed a new fabricated steel wheel which is
approximately 15% lighter than a traditional steel wheel, and is
significantly less expensive to produce than a standard aluminum
wheel. This design combines aspects of both steel and aluminum
products into a low-cost, styled, lightweight alternative
product to the more costly aluminum wheels. The Company believes
that this product will be particularly attractive for economy
style cars, where cost and weight are critical to the OEMs.

North America.The
Company designs, manufactures and distributes a full line of
fabricated wheels to OEMs in North America. This fabrication
process involves stamping the center on high-speed multi-station
transfer presses. The rim is made using specialized, highly
automated, forming equipment. Then the center and rim are welded
together on specialized, automated assembly equipment. The
Company is a leading supplier of fabricated steel wheels in
North America. The Company believes that the North American steel

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wheel market will remain significant because OEMs
will continue to specify less costly fabricated steel wheels for
more moderately priced passenger cars and light trucks and for
most spare wheels.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Company sold substantially all of its North American fabricated
    steel wheels to DaimlerChrysler, Ford and General Motors in
    fiscal 2003. The Company produces fabricated aluminum wheels for
    DaimlerChrysler, Ford, General Motors and Toyota.                                                                                                                                                                                           
|
| | Competition.The
    Companys primary competitors in the North American steel
    wheel market for passenger cars and light trucks are
    ArvinMeritor Inc., Accuride Corp., Topy Industries Ltd. and
    Central Manufacturing Company. The Company does not believe that
    it has any significant competitors in the North American
    fabricated aluminum wheel market.                                                                                         
|
| | Manufacturing.The
    Companys fabricated steel and fabricated aluminum wheels
    are manufactured by a continuous in-line process at its
    manufacturing facility in Sedalia, Missouri. This process
    enhances quality standardization and reduces work-in-process
    inventory. Engineering, research and development for its North
    American fabricated wheels operations is currently performed at
    the Northville and Ferndale, Michigan facilities.

Europe.The Company
designs, manufactures and distributes a full line of fabricated
steel wheels to both OEMs and the automotive aftermarket
throughout Europe. The Company is the leading supplier of
fabricated wheels manufactured in Europe.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys principal customers include BMW, DaimlerChrysler,
    Ford/ Volvo, General Motors, Honda, Kromag, Mitsubishi, Nissan,
    PSA, Renault, Suzuki, Toyota and Volkswagen Group. The
    Companys principal customer in Eastern Europe is Skoda,
    the national automobile manufacturer of the Czech Republic, for
    which the Company is the sole supplier of steel wheels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Competition.The
    Companys principal competitors for the sale of fabricated
    steel wheels in Europe include Compagnie Financiere Michelin,
    Magnetto, Ford Motor Co. and Volkswagen AG. The Company does not
    believe that it has any significant competitors in the European
    aluminum wheel market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | Manufacturing.The
    Company has four fabricated wheel manufacturing facilities in
    Europe, located in Königswinter, Germany; Manresa, Spain;
    Manisa, Turkey; and Ostrava, Czech Republic. The Companys
    Königswinter, Germany facility has highly automated
    production equipment and extensive engineering, research and
    development facilities. The Companys lightweight
    fabricated steel wheel was developed and is manufactured at the
    Königswinter facility. The Companys Manresa, Spain
    facility has developed a niche in wheels for light trucks,
    recreational vehicles and vans. The Manisa, Turkey facility
    produces wheels for the Turkish market and exports both OEM and
    aftermarket wheels to Western Europe. The Ostrava, Czech
    Republic facility has advanced equipment required to meet the
    volume and quality demands of European customers.

South America.The
Company designs, manufactures and distributes a full line of
fabricated steel wheels to both OEMs and the automotive
aftermarket throughout Brazil and Argentina.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys principal customers in Brazil and Argentina
    include DaimlerChrysler, Ford, General Motors, PSA, Renault and
    Volkswagen.                                                                                                                                                                                                                                                                                                                                                     
|
| | Competition.The
    Companys principal competitor for the sale of fabricated
    steel wheels in Brazil and Argentina is ArvinMeritor Inc.                                                                                                                                                                                                                                                                                                                                                                     
|
| | Manufacturing.The
    Company has one fabricated steel wheel manufacturing facility
    located near Sao Paulo, Brazil. Its Brazilian fabricated steel
    wheel manufacturing facility has its own engineering, research
    and development facility and is in the process of being
    converted into a highly automated production facility. In
    addition to serving the local market, the Brazilian facility
    ships fabricated wheels to North America to help meet the
    demands of OEM customers.

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| |                      
| | ---------------------
| | Suspension Components

The Company designs, manufactures and distributes
suspension components for sale to North American OEMs. The
Companys primary suspension component products include:
(i) aluminum structural components, such as structural
crossmembers, subframes, engine cradles and axle components; and
(ii) wheel-end attachments and assemblies, such as steering
knuckles, spindles, hub carriers and control arms. The
Companys suspension components are produced and sold in
North America.

The Company is a technologically advanced
manufacturer of aluminum suspension components for the
automotive industry. The Company casts aluminum using green
sand, permanent mold, squeeze and the VRC/PRC processes.
Components are machined on a variety of state-of-the-art
equipment.

The Company also believes that the most
significant growth area in the market for aluminum vehicle parts
will be in the suspension components area, because aluminum
provides significant weight savings opportunities to automotive
OEMs. The Company opened a new sales and support center in
Stuttgart, Germany in September 2003 to support business
development initiatives with European, Asian and U.S. based
automotive OEM and Tier 1 customers requiring complex cast
suspension components. The Company believes this center will
facilitate the growth of its suspension components business on a
global basis and position it to better serve global OEM
customers. The penetration of aluminum in suspension component
products presently is less than one-half the aluminum
penetration of wheels. The Company believes that it will benefit
in this product category from its leadership position in product
and process technologies that support its focus on high
value-added content.

Aluminum Structural
Components.We design, manufacture and
distribute structural aluminum subframes and crossmembers in
North America. The Company entered the market for aluminum
crossmembers by developing a one-piece cast aluminum crossmember
for the 1995 Chrysler NS Minivan, the first high-volume
application of this product. The Company expects aluminums
market share of this segment to increase, primarily due to
desired weight reductions and ride characteristics.



| |                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys customers include DaimlerChrysler, Ford, General
    Motors and Mitsubishi.                                                                                                                                                                                                                        
|
| | Competition.Given
    the level of manufacturing expertise required to produce
    aluminum structural components, there are only a few
    manufacturers in this segment and Alcoa Inc. is the
    Companys primary competitor.                                                                                              
|
| | Manufacturing.We
    design, manufacture and distribute structural aluminum subframes
    and crossmembers in Montague, Michigan and Bristol, Indiana.
    Engineering, research and development for the Companys
    aluminum structural components operations is currently performed
    at the Ferndale, Michigan facility.

Wheel-End Attachments and
Assemblies.We design, manufacture and
distribute wheel-end attachments and assemblies to OEMs in North
America. The Company produces aluminum and iron knuckles,
spindles and spindle assemblies, iron hub carriers, axle flanges
for the corner of the vehicle and control arms. Wheel
attachments are made from iron, aluminum and steel.



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys principal customers include North American OEMs
    such as DaimlerChrysler, Ford, General Motors, as well as BMW,
    Honda, Mitsubishi and Nissan. The Company also sells to other
    Tier 1 suppliers, including Bosch, Dana, Lemforder and
    Visteon.                             
|
| | Competition.Given
    the fragmented nature of the market, there are no competitors
    with significant market share. The Companys primary
    competitors are Intermet Corp., Citation Corp., Amcast
    Industrial Corp. and Grede Foundries, Inc.                                                               
|
| | Manufacturing.The
    Company manufactures aluminum and iron knuckles, spindles and
    spindle assemblies, iron hub carriers and axle flanges at the
    facilities in Cadillac, Michigan; Southfield, Michigan;
    Montague, Michigan; and Bristol, Indiana. The Companys
    factories utilize various materials

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| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | and casting processes to produce to specific
    product requirements, including weight, performance, safety and
    cost.



| |                 
| | ----------------
| | Brake Components

The Company designs, manufactures and distributes
automotive brake components consisting primarily of cast iron
rotors for disc brakes and composite metal drums and full-cast
drums for drum-type brakes. The Company uses its technological
superiority to develop innovative new component designs for
products with decreased weight and an extended useful life,
including aluminum composite rotors and drums. The
Companys brake components are produced and sold in North
America.



| |                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys primary customers for automotive brake components
    include DaimlerChrysler, Ford, Nissan and Renault. In addition,
    the Company sells to other Tier 1 suppliers, such as Bosch,
    Continental Teves, Delphi Automotive, TRW and Visteon.           
|
| | Competition.The
    Companys principal competitors for the sale of automotive
    brake components are Delphi Corp., TRW Automotive Inc., Bosch
    Automotive Systems Corporation, ADVICS Co., Ltd. and SANLUIS
    Corporación, S.A. de C.V. (Rassini Division).                    
|
| | Manufacturing.The
    Company has two automotive brake facilities in North America,
    located in Homer, Michigan, and Monterrey, Mexico. Engineering,
    research and development for the brake components operations is
    currently performed at the Ferndale, Michigan facility.



| |                      
| | ---------------------
| | Powertrain Components

The Company designs, manufactures and distributes
a variety of aluminum and polymer powertrain components,
including engine intake manifolds, aluminum cylinder heads,
water crossovers, water pumps, brackets and ductile iron exhaust
manifolds. The polymer manifolds market is moving increasingly
to welded technology. The Company believes it is well positioned
to move into this market. The Companys powertrain and
engine components are produced and sold in North America.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Company supplies most of its powertrain components to
    DaimlerChrysler, Ford and General Motors. The Company also
    supplies powertrain components to Nissan in North America and to
    other Tier 1 suppliers, such as Delphi and Visteon.                                                                                                                                                                                                                        
|
| | Competition.The
    Companys primary competitor in aluminum intake manifolds
    is Fort Wayne Foundry. The remainder of the market for
    aluminum intake manifolds is highly fragmented and comprises
    small independent suppliers. Key competitors in polymer intake
    manifolds include Siemens AG, Mann+Hummel Group, Montaplast
    GmBH, Delphi Corp. and Mark IV Industries Inc. Key
    competitors for exhaust manifolds include Wescast Industries
    Inc. and Interact.
|
| | Manufacturing.We
    have two powertrain component manufacturing facilities in North
    America, located in Wabash, Indiana, and Nuevo Laredo, Mexico.
    Engineering, research and development for the powertrain
    components operations is currently performed at the Ferndale,
    Michigan facility.                                                                                                                                                                              



| |                            
| | ---------------------------
| | Commercial Highway Products

The Company designs, manufactures and distributes
wheels and brakes for commercial highway vehicles in North
America, Europe, South America and Asia.

North America.We
manufacture disc wheels and demountable rims for sale to
manufacturers of commercial highway vehicles in North America.
The Company also manufactures two-piece, take-apart wheels for
certain special applications, including the High Mobility
Multiple Purpose Wheeled Vehicle (the Hummer)
produced by AM General Corporation. The Company manufactures
brake components for commercial highway vehicles consisting of
conventional cast iron brake drums and CentriFuse® brake
drums.



| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys largest customers for commercial highway wheels
    and rims include Great Dane Trailers, Monon, Strick and
    Trailmobile, and its largest customers for commercial highway

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| |                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | brake components include Freightliner, PACCAR and
    Volvo. The Companys commercial highway sales are to truck
    and trailer OEMs, original equipment servicers, and aftermarket
    distributors.                                                                                                                                                                                 
|
| | Competition.The
    Companys principal competitors for the sale of commercial
    highway wheels and rims are Accuride Corp. and Alcoa Inc. The
    principal competitors for the sale of commercial highway hubs
    and drums are Gunite Corporation, Webb Wheel
    Products, Inc., ArvinMeritor Inc. and Consolidated Metco.                                                      
|
| | Manufacturing.We
    have three manufacturing facilities in North America that
    produce components for the commercial highway market. These
    facilities are located in Akron, Ohio; Berea, Kentucky; and
    Mexico City, Mexico. Engineering, research and development for
    the commercial highway products operations is performed at the
    Northville, Michigan facility.

Europe.The Company
designs, manufactures and distributes steel truck and trailer
wheels for sale to manufacturers of commercial highway vehicles
in Europe at the Königswinter, Germany facility. In
addition, the Company produces wheels for the forklift truck
market at the Ostrava, Czech Republic facility.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys principal customers for steel wheels for
    commercial highway vehicles are DaimlerChrysler, Renault and
    Volvo.                                                                                                                                                                                                                                                                                                                  
|
| | Competition.The
    Companys principal competitors for the sale of commercial
    highway wheels in Europe are Compagnie Financiere Michelin and
    Magnetto.                                                                                                                                                                                                                                                                                                   
|
| | Manufacturing.In
    Europe, the Company manufactures steel truck and trailer wheels
    at its highly automated Königswinter, Germany facility. At
    this facility, the Company produces a variety of wheels for
    commercial highway vehicles and performs engineering, research
    and development for its commercial highway products operations.
    The Company also manufactures steel truck and trailer wheels at
    its facility in Manisa, Turkey.

South America and
Asia.We design, manufacture and
distribute steel truck and trailer wheels to OEMs in South
America and Asia.



| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Customers.The
    Companys principal customers for steel wheels for
    commercial highway vehicles in South America are
    DaimlerChrysler, Ford/Volvo, Randon and Volkswagen. Its largest
    customers for steel wheels for commercial highway vehicles in
    Asia are Telco and Volvo.
|
| | Competition.The
    Companys principal competitor for the sale of commercial
    highway wheels in South America is FNV. The principal competitor
    for the sale of commercial highway wheels in Asia is Wheels of
    India.                                                             
|
| | Manufacturing.The
    Company manufactures steel truck and trailer wheels in South
    America at its Sao Paulo, Brazil facility and in Asia at the
    Pune, India facility.                                                                                                                



| |                 
| | ----------------
| | Other Businesses

The Company has aluminum operations in Europe
that manufacture a variety of cast aluminum products, including
heat exchangers used in gas-fired boilers, intake manifolds and
aluminum housings for automotive and commercial vehicle
applications, and a variety of aluminum products for the general
industrial and electronics industries. The operations are owned
by the Companys subsidiary, called Metaalgieterij Giesen
B.V. (MGG). MGG has three facilities, two of which
are in the Netherlands and one of which is in Belgium.

Business Segment and Geographical
Information

See Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations, and Note (18), Segment
Information to the consolidated financial statements,
which are incorporated herein by reference.

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Material Source and Supply

The Company purchases most of the raw materials
(such as steel and aluminum) and semi-processed or finished
items (such as castings) used in its products from suppliers
located within the geographic regions of the Companys
operating units. In many cases, these materials are available
from several qualified sources in quantities sufficient for the
Companys needs. However, shortages of a particular
material or part occasionally occur. During 2003 and into early
2004, metal markets in global and regional sectors have
experienced significant pricing and supply volatility,
particularly where agreements and contracts are not in place.

To minimize materials supply issues, the Company
centralized its materials and logistics function during 2002 and
2003. In addition, the Company has developed long-term
multi-tiered materials sourcing strategies and new supply chain
relationships to minimize costs. Although the Company currently
maintains alternative sources for raw materials, its businesses
are subject to the risk of material surcharges and periodic
delays in the delivery of certain raw materials and supplies.

Global spot market steel prices have
significantly increased during 2003 and into early 2004. Factors
leading to the higher prices include the increasing demand for
steel in China, industry consolidation and rising raw material
costs. In response to the increasing cost of raw materials, a
number of steel suppliers have implemented surcharges on
existing fixed price contracts. Without the surcharge some
suppliers claim they will be unable to provide adequate supplies
of steel. In addition, some of the Companys suppliers have
sought, and others may seek in the future, bankruptcy relief
which could affect the availability or price of steel. These
factors could negatively impact the Companys results of
operations as it may be unable to compel suppliers to comply
with existing contracts or to source adequate supplies of steel.
The Company believes it can partially offset the impact of cost
increases through higher scrap sales recoveries and or by
passing some of these costs through to certain of its customers.
The full impact of steel prices is uncertain given the
volatility in the spot steel market.

Intellectual Property

The Company considers itself to be an industry
leader in product and process technology, and owns significant
intellectual property, including numerous United States and
foreign patents, trade secrets, trademarks and copyrights.
Therefore, the protection of the Companys intellectual
property is important to its business. The Companys policy
is to seek statutory protection for all significant intellectual
property embodied in patents, trademarks and copyrights. The
Company relies on a combination of patents, trade secrets,
trademarks and copyrights to provide protection in this regard,
but this protection might be inadequate. For example, the
Companys pending or future patent applications might not
be approved or, if allowed, they might not be of sufficient
strength or scope. Conversely, third parties might assert that
the Companys technologies infringe their proprietary
rights. In either case, litigation, which could result in
substantial costs and diversion of its efforts, might be
necessary, and whether or not the Company is ultimately
successful, the litigation could adversely affect the
Companys business.

Although the Companys intellectual property
is important to its business operations and in the aggregate
constitutes a valuable asset, the Company does not believe that
any single patent, trade secret, trademark or copyright, or
group thereof, is critical to the success of the business. The
Company, from time to time, grants licenses under its patents
and technology, and receives licenses under patents and
technology of others.

Research and Development

The Companys objective is to be a leader in
offering superior quality and technologically advanced products
to its customers at competitive prices. The Company engages in
ongoing engineering, research and development activities to
improve the reliability, performance and cost-effectiveness of
its existing products and to design and develop new products for
existing and new applications. The Companys spending on
engineering, research and development programs was
$2.9 million for the eight months ended January 31,
2004, $1.5 million for the four months ended May 31,
2003, $7.1 million in fiscal 2002 and $10.5 million in
fiscal 2001.

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Seasonality

While the Companys business is not seasonal
in the traditional sense, July (in North America), August (in
Europe) and December are usually lower sales volume months
because OEMs typically perform model changeovers or take
vacation shutdowns during the summer, and assembly plants are
typically closed for a period from shortly before the year end
holiday season until after New Years Day.

Customer Dependence

In fiscal 2003, the Companys principal
customers were Ford, DaimlerChrysler and General Motors (the
three of which comprised approximately 50% of the Companys
fiscal 2003 net sales on a worldwide basis), as well as
BMW, Volkswagen, Nissan and Honda. Other customers include
Toyota, Isuzu, Renault, Fiat, Porsche, Audi, Citroen, Peugeot,
Skoda, Mazda, Mitsubishi and Suzuki. The Company also sells some
of its components to other Tier I automotive suppliers such
as Bosch, Continental Teves, Delphi, TRW and Visteon. In fiscal
2003, the Company also had over 300 commercial highway vehicle
customers in North America, Europe and Asia, including
Trailmobile, Dana/ Mack, DaimlerChrysler, Iveco, Strick,
Great Dane Trailers, Freightliner, PACCAR, Volvo, General
Motors, Renault, Western Star, Schmitz Cargobull and Koegal.

The loss of a significant portion of the
Companys sales to any of its principal customers could
have a material adverse impact on the Company. The Company has
been doing business with each of its principal customers for
many years, and sales are composed of a number of different
products and of different models or types of the same products
and are made to individual divisions of such customers. In
addition, the Company supplies products to many of these
customers in both North America and Europe, which reduces the
Companys reliance on any single market.

Backlog

Generally, the Companys products are not on
a backlog status. The Companys products are produced from
readily available materials, have a relatively short
manufacturing cycle and have short customer lead times. Each
operating unit maintains its own inventories and production
schedules.

Competition

The major domestic and foreign markets for the
Companys products are highly competitive. Competition is
based primarily on price, technology, quality, delivery and
overall customer service. The Companys customers have
shifted research and development, design and validation
responsibilities to their key suppliers, focusing on stronger
relationships with fewer suppliers. The Companys global
competitors include a large number of other well-established
suppliers. Competitors typically vary among each of the
Companys products and geographic markets.

Joint Ventures

On November 13, 2003, the Company acquired
an additional 35% ownership interest in its Turkish joint
venture for $13.9 million in cash and will pay an
additional $1.1 million in the first quarter of fiscal
2004. As a result of this acquisition, the Company owns 60% of
the subsidiary, Hayes Lemmerz Jantas Jant Sanayi ve Ticaret
A.S., which became a consolidated subsidiary of the Company
beginning in the fourth quarter of fiscal 2003. As part of this
transaction, the Company sold an approximate 7.8% interest in
another Turkish subsidiary, Hayes Lemmerz  Inci Jant
Sanayi A.S., for $2.4 million. This sale reduced the
Companys holdings in Hayes Lemmerz  Inci Jant
Sanayi A.S. to 60%.

On January 15, 2004, the Company acquired
for $15.7 million in cash, excluding any net forgiveness of
debt, a cast aluminum wheel plant located in Chihuahua, Mexico
formerly operated as part of a joint venture in which the
Company owned a 40% minority interest. As part of this
transaction, all of the Companys previously held common
stock in the joint venture was sold to the former joint venture
partner. Following the Companys planned refurbishment and
expansion of the plant, it will serve the North American wheel
market

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utilizing low pressure casting technology. As a
result of these transactions, the Company no longer maintains
any significant minority interest investments in joint ventures.


Environmental Compliance

The Company is subject to various foreign,
federal, state and local environmental laws, ordinances, and
regulations, including those governing discharges into the air
and water; the storage, handling and disposal of solid and
hazardous wastes; the remediation of soil and groundwater
contaminated by petroleum products or hazardous substances or
wastes; and the health and safety of its employees. Under
certain of these laws, ordinances or regulations, a current or
previous owner or operator of property may be liable for the
costs of removal or remediation of certain hazardous substances
or petroleum products on, under, or in its property, without
regard to whether the owner or operator knew of, or caused, the
presence of the contaminants, and regardless of whether the
practices that resulted in the contamination were legal at the
time they occurred. The presence of, or failure to remediate
properly, such substances may adversely affect the ability to
sell or rent such property or to borrow using such property as
collateral. Persons who generate, arrange for the disposal or
treatment of, or dispose of hazardous substances may be liable
for the costs of investigation, remediation or removal of these
hazardous substances at or from the disposal or treatment
facility, regardless of whether the facility is owned or
operated by that person. Additionally, the owner of a site may
be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination
emanating from a site.

The Company believes that it is in material
compliance with environmental laws, ordinances and regulations
and do not anticipate any material adverse effect on its
earnings or competitive position relating to environmental
matters. It is possible, however, that future developments could
lead to material costs of environmental compliance for the
Company. The nature of the Companys current and former
operations and the history of industrial uses at some of its
facilities expose the Company to the risk of liabilities or
claims with respect to environmental and worker health and
safety matters which could have a material adverse effect on its
financial health. The Company is also required to obtain permits
from governmental authorities for certain operations. The
Company cannot assure that what has been, or will be at all
times, in complete compliance with such permits. If the Company
violates or fails to comply with these permits, the Company
could be fined or otherwise sanctioned by regulators. In some
instances, such a fine or sanction could be material. In
addition, some of the Companys properties are subject to
indemnification and/or cleanup obligations of third parties with
respect to environmental matters. However, in the event of the
insolvency or bankruptcy of such third parties, the Company
could be required to bear the liabilities that would otherwise
be the responsibility of such third parties. See
Item 3. Legal Proceedings. The Company has 25
facilities registered or recommended for registration under ISO
14001 and is working to obtain ISO 14001 Registration at all
manufacturing facilities worldwide.

Sales and Marketing

The Company has a sales and marketing
organization of dedicated customer teams that provide a
consistent interface with key customers. These teams are located
in all major vehicle producing regions to best represent their
respective customers interests within the Company, to
promote customer programs and to coordinate global customer
strategies with the goal of enhancing overall customer service
and satisfaction. The Companys ability to support its
customers globally is further enhanced by the Companys
broad global presence in terms of sales offices, manufacturing
facilities, engineering/technical centers and joint ventures.

Employees

At January 31, 2004, the Company had
approximately 11,000 employees. Of the Companys employees
in the United States, approximately 5.8% were represented by the
United Auto Workers (UAW) or United Steel Workers
(USW) unions. On April 1, 2004 the Company
announced that it would close its Howell, MI facility in the
second quarter of fiscal 2004. All hourly employees at this
facility are represented by the UAW. The Company will begin
required effects bargaining with the UAW shortly. The Collective
Bargaining Agreement with the USW affecting the hourly employees
in the Akron, OH facility expires in July 2004. As is

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common in many European jurisdictions,
substantially all of the Companys employees in Europe are
covered by country-wide collective bargaining agreements. These
agreements expire at various times through 2004. Additional
agreements are often made with the facility Works Council on an
individual basis covering miscellaneous topics of local concern.
There are no Company-wide or industry-wide bargaining units in
the United States. Although the Company believes that its
relations with its employees are good, a dispute between the
Company and the Companys employees, or between any of its
major customers and that customers employees, could have a
material adverse effect on the Company.


International Operations

The Companys world headquarters is located
in Northville, Michigan. The Company has a worldwide network of
44 facilities in the United States, Germany, Italy, Spain,
the Netherlands, Belgium, the Czech Republic, Turkey, Brazil,
South Africa, Mexico, Thailand and India. The Company also
provides sales, engineering and customer service throughout the
world. The Company has advanced research and development
facilities in the United States, Germany, Belgium, Italy and
Brazil and a sales and engineering office in Japan.

Available Information

Hayes Lemmerz International, Inc.s
internet website address is www.hayes-lemmerz.com. The
Companys annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and
any amendments to those reports filed or furnished pursuant to
section 13(a) or 15(d) of the Exchange Act are available
free of charge through the Companys website as soon as
reasonably practical after those reports are electronically
filed with, or furnished to, the Securities and Exchange
Commission.






|        |           
|------- | ----------
|Item 2. | Properties

The Companys world headquarters is located
in Northville, Michigan. The Company operates 24 facilities in
North America with approximately five million square feet in the
aggregate. Within Europe, the Company operates 14 manufacturing
facilities with approximately four million square feet in the
aggregate. In South America, Asia and South Africa, the Company
operates six facilities with approximately two million
square feet in the aggregate. The Company believes that its
plants are adequate and suitable for the manufacturing of
products for the markets in which it sells. In addition to the
operating facilities noted above, the Company has two
non-operating facilities in the United States which are
currently held for sale.

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The following table summarizes the Companys
operating facilities.

|                                       |  |                                  |  |                           |  |                |           |  |        |       
|-------------------------------------- |  | -------------------------------- |  | ------------------------- |  | -------------- | --------- |  | ------ | ------
|                                       |  |                                  |  |                           |  | Approximate    |           |  | Owned/
|Location                               |  | Segment                          |  | Purpose                   |  | Size (sq. ft.) |           |  | Leased
|                                       |  |                                  |  |                           |  |                |           |  |       
|North America                          |  |                                  |  |                           |  |                |           |  |        |       
|Northville, MI                         |  | Other                            |  | World Headquarters, R&D   |  |                | 160,000   |  |        | Owned 
|Ferndale, MI                           |  | Components and Other             |  | Technical Center, Offices |  |                | 150,000   |  |        | Owned 
|La Mirada, CA                          |  | Automotive Wheels                |  | Manufacturing             |  |                | 260,000   |  |        | Leased
|Gainesville, GA                        |  | Automotive Wheels                |  | Manufacturing             |  |                | 265,000   |  |        | Owned 
|Huntington, IN                         |  | Automotive Wheels                |  | Manufacturing             |  |                | 200,000   |  |        | Owned 
|Howell, MI                             |  | Automotive Wheels                |  | Manufacturing             |  |                | 150,000   |  |        | Owned 
|Sedalia, MO                            |  | Automotive Wheels                |  | Manufacturing             |  |                | 630,000   |  |        | Owned 
|Chihuahua, Mexico                      |  | Automotive Wheels                |  | Manufacturing             |  |                | 120,000   |  |        | Owned 
|Berea, KY                              |  | Other                            |  | Manufacturing             |  |                | 203,000   |  |        | Owned 
|Akron, OH                              |  | Other                            |  | Manufacturing             |  |                | 410,000   |  |        | Owned 
|Mexico City, Mexico                    |  | Other                            |  | Manufacturing             |  |                | 100,000   |  |        | Owned 
|Chattanooga, TN                        |  | Other                            |  | Manufacturing             |  |                | 106,000   |  |        | Owned 
|Howell, MI                             |  | Other                            |  | Warehouse                 |  |                | 56,000    |  |        | Leased
|Southfield, MI (2 facilities)          |  | Components                       |  | Manufacturing             |  |                | 206,000   |  |        | Owned 
|Cadillac, MI                           |  | Components                       |  | Manufacturing             |  |                | 274,000   |  |        | Owned 
|Montague, MI                           |  | Components                       |  | Manufacturing             |  |                | 225,000   |  |        | Owned 
|Bristol, IN                            |  | Components                       |  | Manufacturing             |  |                | 380,000   |  |        | Owned 
|Homer, MI                              |  | Components                       |  | Manufacturing             |  |                | 180,000   |  |        | Owned 
|Monterrey, Mexico                      |  | Components                       |  | Manufacturing             |  |                | 88,000    |  |        | Leased
|Nuevo Laredo, Mexico                   |  | Components                       |  | Manufacturing             |  |                | 408,000   |  |        | Owned 
|Laredo, TX                             |  | Components                       |  | Offices and Warehouse     |  |                | 10,000    |  |        | Leased
|Wabash, IN                             |  | Components                       |  | Manufacturing             |  |                | 165,000   |  |        | Owned 
|AuGres, MI                             |  | Other                            |  | Manufacturing             |  |                | 41,000    |  |        | Owned 
|Europe                                 |  |                                  |  |                           |  |                |           |  |        |       
|Campiglione Fenile, Italy              |  | Automotive Wheels                |  | Manufacturing             |  |                | 143,000   |  |        | Leased
|Barcelona, Spain                       |  | Automotive Wheels                |  | Manufacturing             |  |                | 105,000   |  |        | Owned 
|Hoboken, Belgium
    (2 facilities)    |  | Automotive Wheels and Components |  | Manufacturing             |  |                | 486,000   |  |        | Owned 
|Dello, Italy                           |  | Automotive Wheels                |  | Manufacturing             |  |                | 247,000   |  |        | Owned 
|Ostrava, Czech Republic (2 facilities) |  | Automotive Wheels                |  | Manufacturing             |  |                | 1,082,000 |  |        | Owned 
|Manresa, Spain                         |  | Automotive Wheels                |  | Manufacturing             |  |                | 357,000   |  |        | Owned 
|Manisa, Turkey
    (2 facilities)      |  | Automotive Wheels                |  | Manufacturing             |  |                | 326,000   |  |        | Owned 
|Königswinter, Germany (2 facilities)   |  | Automotive Wheels                |  | Manufacturing             |  |                | 1,490,000 |  |        | Owned 
|Bergen, Netherlands                    |  | Components                       |  | Manufacturing             |  |                | 75,000    |  |        | Owned 
|Tegelen, Netherlands                   |  | Components                       |  | Manufacturing             |  |                | 291,000   |  |        | Owned 

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|                                     |  |                   |  |               |  |                |         |  |        |       
|------------------------------------ |  | ----------------- |  | ------------- |  | -------------- | ------- |  | ------ | ------
|                                     |  |                   |  |               |  | Approximate    |         |  | Owned/
|Location                             |  | Segment           |  | Purpose       |  | Size (sq. ft.) |         |  | Leased
|                                     |  |                   |  |               |  |                |         |  |       
|Rest of the World                    |  |                   |  |               |  |                |         |  |        |       
|Sao Paulo, Brazil
    (2 facilities) |  | Automotive Wheels |  | Manufacturing |  |                | 866,000 |  |        | Owned 
|Johannesburg, South Africa           |  | Automotive Wheels |  | Manufacturing |  |                | 269,000 |  |        | Owned 
|Pune, India                          |  | Automotive Wheels |  | Manufacturing |  |                | 305,000 |  |        | Leased
|Bangkok, Thailand                    |  | Automotive Wheels |  | Manufacturing |  |                | 158,000 |  |        | Leased
|Yokohama, Japan                      |  | Automotive Wheels |  | Sales Office  |  |                | 3,000   |  |        | Leased






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

On February 19, 2002, the Company issued
restated consolidated financial statements as of and for the
fiscal years ended January 31, 2001 and 2000, and related
quarterly periods (the 10-K/ A), and for the fiscal
quarter ended April 30, 2001 (the 10-Q/ A). The
restatement was the result of failure by the Company to properly
apply certain accounting standards generally accepted in the
United States of America, and because certain accounting errors
and irregularities in the Companys financial statements
were identified. The Securities and Exchange Commission (the
SEC) is conducting an investigation into the facts
and circumstances giving rise to the restatements. The Company
has been and intends to continue cooperating with the SEC in
connection with such investigation, but the Company cannot
predict the outcome of the investigation. There can be no
assurance that the SEC will not impose fines or take other
corrective actions against the Company that could have a
significant negative impact on the Companys financial
condition. In addition, publicity surrounding the SECs
investigation or any enforcement action, even if ultimately
resolved favorably for us, could have a material adverse impact
on the Companys financial condition, results of operations
or business.

On May 3, 2002, a group of purported
purchasers of the Predecessor Companys bonds commenced a
putative class action lawsuit against thirteen present or former
directors and officers of the Company (but not the Company) and
KPMG LLP, the Companys independent auditor, in the United
States District Court for the Eastern District of Michigan. The
complaint seeks damages for an alleged class of persons who
purchased Company bonds between June 3, 1999 and
September 5, 2001 and claim to have been injured because
they relied on the Companys allegedly materially false and
misleading financial statements. On June 27, 2002, the
plaintiffs filed an amended class action complaint adding CIBC
World Markets Corp. and Credit Suisse First Boston Corporation,
underwriters for certain bonds issued by the Company, as
defendants. These claims were not discharged upon the
effectiveness of the Plan of Reorganization because they are
against the Companys present and former directors and
officers and KPMG LLP, and not against the Company.

Additionally, before the date the Company
commenced its Chapter 11 Bankruptcy case, four other
putative class actions were filed in the United States District
Court for the Eastern District of Michigan against the Company
and certain of its directors and officers, on behalf of a class
of purchasers of Company common stock from June 3, 1999 to
December 13, 2001, based on similar allegations of
securities fraud. On May 10, 2002, the plaintiffs filed a
consolidated and amended class action complaint seeking damages
against the Companys present and former officers and
directors (but not the Company) and KPMG. Pursuant to the
Companys Plan of Reorganization, the Company purchased
directors and officers liability insurance for
certain of these current and former directors and officers and
agreed to indemnify such individuals against certain
liabilities, including those matters described above, up to an
aggregate of $10 million in excess of any coverage to or
for the benefit of all indemnitees.

On June 13, 2002, the Company filed an
adversary complaint and motion for a preliminary injunction in
the Bankruptcy Court requesting the Court to stay the class
action litigation commenced by the bond purchasers and equity
purchasers. Additionally, on July 25, 2002, the Company
filed with the Bankruptcy Court a motion to lift the automatic
stay in the Chapter 11 Filings to allow the insurance
company that provides officer and director liability insurance
to the Company to pay the defense costs of the Companys
present and former officers and directors in such litigation.
The Bankruptcy Court entered an order permitting

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the insurance company to pay defense costs
incurred by the Companys present and former officers and
directors in the litigation, subject to certain conditions, in
increasing amounts up to $800,000 pursuant to further authority
in the order. After that order, the Company withdrew its motion
for a preliminary injunction. Since the Effective Date of the
Plan of Reorganization, the automatic stay no longer applies to
the proceeds of the officer and director liability insurance
policies which, therefore, have been generally available for
defense costs incurred by the individual director and officer
insured defendants in the class action and related litigations.


During the pendency of the Companys
Chapter 11 cases, certain disputes arose between the
Company, on one hand, and DESC Automotriz, S.A. de C.V.
(DESC) and Hayes Wheels Aluminio, S.A. de C.V.
(HW Aluminio) on the other, relating to the
Companys 40% joint venture interest in Hayes Wheels de
Mexico, S.A. de C.V., a Mexican corporation
manufacturing aluminum and steel wheels (HW de
Mexico). In connection with these disputes DESC and
HW Aluminio asserted administrative expense claims against
the Company in an amount not less than $20.6 million
relating to allegedly improper actions taken by the Company with
respect to HW de Mexico during the Chapter 11 cases.
On January 15, 2004, the Company purchased certain assets
from HW Aluminio and sold its 40% interest in HW de Mexico
to DESC. As a part of this transaction, the parties agreed to
dismiss and withdraw all litigation between themselves. All
pleadings necessary to dismiss and withdraw such matters have
been filed with and approved by the necessary courts.

In October 2003, General Electric Credit
Corporation (GECC) filed an amended administrative
claim in the Bankruptcy Court for $7.5 million relating to
certain leased equipment. The leases were rejected during the
Companys Chapter 11 cases. GECC is alleging that its
damages were incurred post-petition because the equipment was
returned post-petition. If the Bankruptcy Court determines that
GECCs damages are a post-petition expense, GECC may be
entitled to an administrative claim for the claims full
amount. The Company is disputing the amount and the merits of
GECCs claim.

The Company is the defendant in a patent
infringement matter filed in 1997 in the United States District
Court, Eastern District of Michigan. Lacks Incorporated
(Lacks) alleged that the Company infringed on three
patents held by Lacks relating to chrome-plated plastic cladding
for steel wheels. Prior to fiscal 2000, the Federal District
Court dismissed all claims relating to two of the three patents
that Lacks claimed were infringed and dismissed many of the
claims relating to the third patent. The remaining claims
relating to the third patent were submitted to a special master.
In January 2001, the special master issued a report finding the
Lacks third patent was invalid and recommending that
Lacks remaining claims be dismissed, the trial court
accepted these recommendations. Lacks appealed this matter to
the Federal Circuit Court. The Federal Circuit Court vacated the
trial courts ruling that the third patent was invalid and
remanded the matter back to the trial court for further
proceedings. In addition to the Companys defenses in the
lawsuit, the Company has certain rights of indemnification
against a co-defendant in the matter that supplied the allegedly
infringing product to the Company. In July 2003, Lacks filed an
administrative claim in the Bankruptcy Court for
$12 million relating to the alleged patent infringement.

The Company was party to a license agreement with
Kuhl Wheels, LLC (Kuhl), whereby Kuhl granted
the Company an exclusive patent license concerning high
vent steel wheel technology known as the Kuhl Wheel (the
Kuhl Wheel), which agreement was terminated as of
January 10, 2003 pursuant to a stipulation between the
Company and Kuhl entered in connection with the Companys
bankruptcy proceeding. The original license agreement (as
amended, the License Agreement), dated May 11,
1999, granted the Company a non-exclusive license for the Kuhl
Wheel technology. The License Agreement was subsequently amended
to provide the Company with an exclusive worldwide license. On
January 14, 2003, the Company filed a Complaint for
Declaratory and Injunctive Relief against Kuhl and its
affiliate, Epilogics Group, in the United States District Court
for the Eastern District of Michigan. The Company commenced such
action seeking a declaration of noninfringement of two United
States patents and injunctive relief to prevent Epilogics Group
and Kuhl from asserting claims of patent infringement against
the Company, and disclosing and using the Companys
technologies, trade secrets and confidential information to
develop, market, license, manufacture or sell automotive wheels.

The nature of the Companys business
subjects it to litigation in the ordinary course of its
business. In addition, the Company is from time to time involved
in other legal proceedings. Although all claims made

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against the Company prior to the date of the
bankruptcy filing, except as described in the immediately
following paragraph, were satisfied in accordance with the terms
of the Plan of Reorganization or in connection with settlement
agreements that were approved by the Bankruptcy Court prior to
the Companys emergence from bankruptcy, the Company cannot
assure that any remaining or future claims will not have a
significant negative impact on its results of operations and
profitability. In addition, claims made after the date of the
Companys bankruptcy filing were not discharged in the
bankruptcy proceeding.


Claims made against the Company prior to the date
of the bankruptcy filing may not have been discharged if the
claimant had no notice of the bankruptcy filing. The Company is
not presently aware of any such claims. In addition, in other
bankruptcy cases, states have challenged whether their claims
could be discharged in a federal bankruptcy proceeding if they
never made an appearance in the case. This issue has not been
finally settled by the U.S. Supreme Court. Therefore, the
Company can give no assurance that its emergence from bankruptcy
resulted in a discharge of all claims against the Company with
respect to periods prior to the date the Company filed for
bankruptcy protection. Any such claim not discharged could have
a material adverse effect on the Companys financial
condition and profitability; however, the Company is not
presently aware of any such claims. Moreover, the Companys
European operations and certain other foreign operations did not
file for bankruptcy protections, and claims against them are not
affected by the Companys bankruptcy filing.

In the ordinary course of its business, the
Company is a party to other judicial and administrative
proceedings involving its operations and products, which may
include allegations as to employment practices and manufacturing
quality, design and safety. The Company carries insurance
coverage in such amounts in excess of its self-insured retention
as management believes to be reasonable under the circumstances
and which may or may not cover any or all of the Companys
liabilities in respect of claims and lawsuits. After reviewing
the proceedings that are currently pending (including the
probable outcomes, reasonably anticipated costs and expenses,
availability and limits of insurance rights under
indemnification agreements and established reserves for
uninsured liabilities), management believes that the outcome of
these proceedings will not have a material adverse effect on the
financial condition or ongoing results of operations of the
Company.

The Company is exposed to potential product
liability and warranty risks that are inherent in the design,
manufacture and sale of automotive products, the failure of
which could result in property damage, personal injury or death.
Accordingly, individual or class action suits alleging product
liability or warranty claims could result. Although the Company
currently maintains what is believed to be suitable and adequate
product liability insurance in excess of its self-insured
amounts, there can be no assurance that the Company will be able
to maintain such insurance on acceptable terms or that such
insurance will provide adequate protection against potential
liabilities. In addition, if any of the Companys products
prove to be defective, the Company may be required to
participate in a recall involving such products. A successful
claim brought against the Company in excess of available
insurance coverage, if any, or a requirement to participate in
any product recall, could have a material adverse effect on its
results of operations or financial condition.

Under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended
(CERCLA), the Company currently has potential
environmental liability arising out of both its wheel and
non-wheel businesses at 17 Superfund sites (the
Sites). Five of the Sites were related to the
operations of Motor Wheel prior to the divestiture of that
business by The Goodyear Tire & Rubber Co.
(Goodyear). In connection with the 1986 purchase of
Motor Wheel by MWC Holdings, Inc. (Holdings),
Goodyear agreed to retain all liabilities relating to these
Sites and to indemnify and hold Holdings harmless with respect
thereto. Goodyear has acknowledged this responsibility and is
presently representing the interests of the Company with respect
to all matters relating to these five Sites.

As a result of activities which took place at the
Companys Howell, Michigan facility prior to its
acquisition by the Company, the United States Environmental
Protection Agency (the EPA) is performing, under
CERCLA, a remedial investigation/feasibility study of PCB
contamination at this Site, and in the adjacent South Branch of
the Shiawasee River. Under the terms of a consent judgment
entered into in 1981 by Cast Forge, Inc. (Cast
Forge) (the previous owner of this Site) and the State of
Michigan, any additional PCB cleanup which may be required is
the financial responsibility of the State of Michigan, and not

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of Cast Forge or its successors or assigns
(including the Company). The EPA has concurred in the consent
judgment.


The Company is working with various government
agencies and the other parties identified by the applicable
agency as potentially responsible parties to resolve
its liability with respect to seven Sites. The Companys
potential liability at each of these Sites is not currently
anticipated to be material.

The Company has potential environmental liability
at the four remaining Sites arising out of businesses presently
operated by Kelsey-Hayes. Kelsey-Hayes has assumed and agreed to
indemnify the Company with respect to any liabilities associated
with these Sites. Kelsey-Hayes has acknowledged this
responsibility and is presently representing the interests of
the Company with respect to these sites.

Kelsey-Hayes, and in certain cases the Company,
may remain liable with respect to environmental cleanup costs in
connection with certain divested businesses, relating to
aerospace, heavy-duty truck components and farm implements,
under Federal and state laws and under agreements with
purchasers of these divested businesses. The Company believes,
however, that such costs in the aggregate will not have a
material adverse effect on the consolidated operations or
financial condition of the Company and, in any event,
Kelsey-Hayes has assumed and agreed to indemnify the Company
with respect to any liabilities arising out of or associated
with these divested businesses.

In addition to the Sites, the Company also has
potential environmental liability at two state-listed sites in
Michigan and one in California. Of the Michigan sites, one is
covered under the indemnification agreement with Goodyear
described above. The Company is presently working with the
Michigan Department of Environmental Quality to resolve its
liability with respect to the second Michigan site, for which no
significant costs are anticipated. The California site is a
former wheel manufacturing site operated by Kelsey-Hayes in the
early 1980s. The Company is working with two other
responsible parties and with the State of California on
investigation and remediation of this site.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

None.




PART II





|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

The Company had 30,000,000 shares of Common
Stock outstanding and 21 record holders as of
January 31, 2004. The Companys shares trade on the
NASDAQ National Market under the symbol HAYZ. From
June 4, 2003 until December 1, 2003, the
Companys common stock traded in the over-the-counter
market through the OTCBB and in the pink sheets
under the symbol HAYZ. The range of sale prices for
the Companys common stock as reported by the Nasdaq
National Market from December 2, 2003 until
January 31, 2004 and by the OTCBB at www.otcbb.com and Pink
Sheets LLC at www.pinksheets.com from June 4, 2003 through
December 1, 2003 ranged from a high of $23.64 per
share on January 28, 2004 to a low of $11.00 per share
on June 10, 2003. Although the foregoing prices have been
obtained from sources believed to be reliable, no assurances can
be given with respect to the accuracy of such prices or as to
whether other prices higher or lower than those set forth above
have been quoted. In addition, such prices reflect interdealer
prices which may not include retail mark-up, mark down or
commission and may not necessarily represent actual transactions.

22



---



##### Table of Contents



The following table sets forth, for the fiscal
quarters indicated, the high and low sale prices per share as
reported by the Nasdaq National Market from December 2,
2003 until January 31, 2004 and by the OTCBB at
www.otcbb.com and Pink Sheets LLC at www.pinksheets.com from
June 4, 2003 through December 1, 2003:

|             |                                                    |      |   |       |     |  |   |       | 
|------------ | -------------------------------------------------- | ---- | - | ----- | --- |  | - | ----- | 
|             |                                                    | High |   |       | Low | 
|             |                                                    |      |   |       |     | 
|Fiscal 2003: |                                                    |      |   |       |     |  |   |      
|             | Second quarter (June 4, 2003 to
    July 31, 2003) |      | $ | 14.90 |     |  | $ | 11.00 | 
|             | Third quarter                                      |      |   | 17.00 |     |  |   | 13.70 | 
|             | Fourth quarter                                     |      |   | 23.64 |     |  |   | 15.25 | 

The Company has not paid dividends on its common
stock in fiscal 2003, and does not intend to pay dividends on
its common stock in the foreseeable future.

23



---



##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

As a result of the application of fresh start
accounting on May 31, 2003, and in accordance with
SOP 90-7, the post-emergence financial results of the
Company for the period ending January 31, 2004 are
presented as the Successor and the pre-emergence
financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor.
Comparative financial statements do not straddle the Effective
Date because in effect the Successor Company represents a new
entity.

The following table sets forth selected
consolidated financial data with respect to the Company for the
eight months ended January 31, 2004, the four months ended
May 31, 2003, and the four fiscal years ended
January 31, 2003. The information set forth below should be
read in conjunction with the Companys Consolidated
Financial Statements and Notes to Consolidated Financial
Statements filed herewith, beginning at page F-1.

|                       |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             |  |   |         |   |  |   |         | 
|---------------------- | ---------------------------------------------------------------------------- | ------------------------------------------- | - | ------- | ----------- |  | - | ----------- | - |  | ----------- | -------- | - | ----------- | - | ------- | ----------- |  | - | ------- | - |  | - | ------- | 
|                       |                                                                              |                                             |   |        
|                       |                                                                              | Successor                                   |   |         | Predecessor | 
|                       |                                                                              |                                             |   |         |             | 
|                       |                                                                              | Eight                                       |   |         | Four        |  |   |            
|                       |                                                                              | Months                                      |   |         | Months      |  |   | Year        |   |  | Year        |          |   | Year        |   |         | Year        | 
|                       |                                                                              | Ended                                       |   |         | Ended       |  |   | Ended       |   |  | Ended       |          |   | Ended       |   |         | Ended       | 
|                       |                                                                              | January 31,                                 |   |         | May 31,     |  |   | January 31, |   |  | January 31, |          |   | January 31, |   |         | January 31, | 
|                       |                                                                              | 2004                                        |   |         | 2003        |  |   | 2003        |   |  | 2002        |          |   | 2001        |   |         | 2000        | 
|                       |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             | 
|                       |                                                                              |                                            
|                       |                                                                              | (Amounts in millions, except share amounts) |  
|Income Statement Data: |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             |  |   |         |   |  |   |        
|                       | Net sales                                                                    |                                             | $ | 1,366.6 |             |  | $ | 689.8       |   |  | $           | 2,001.6  |   |             | $ | 2,039.1 |             |  | $ | 2,168.2 |   |  | $ | 2,295.1 | 
|                       | Depreciation and amortization                                                |                                             |   | 111.1   |             |  |   | 46.4        |   |  |             | 132.0    |   |             |   | 156.4   |             |  |   | 152.1   |   |  |   | 135.8   | 
|                       | Asset impairments and other restructuring charges                            |                                             |   | 28.9    |             |  |   | 6.4         |   |  |             | 43.5     |   |             |   | 141.6   |             |  |   | 127.7   |   |  |   | 3.7     | 
|                       | Loss on investment in joint venture                                          |                                             |   |        |             |  |   |            |   |  |             |         |   |             |   | 3.8     |             |  |   | 1.5     |   |  |   |        | 
|                       | Interest expense, net(1, 2)                                                  |                                             |   | 42.1    |             |  |   | 22.7        |   |  |             | 72.7     |   |             |   | 175.2   |             |  |   | 163.5   |   |  |   | 153.3   | 
|                       | Subsidiary preferred stock dividends                                         |                                             |   | 0.5     |             |  |   |            |   |  |             |         |   |             |   |        |             |  |   |        |   |  |   |        | 
|                       | Reorganization items                                                         |                                             |   |        |             |  |   | 45.0        |   |  |             | 44.5     |   |             |   | 47.8    |             |  |   |        |   |  |   |        | 
|                       | Fresh start accounting adjustments(3)                                        |                                             |   |        |             |  |   | (63.1       | ) |  |             |         |   |             |   |        |             |  |   |        |   |  |   |        | 
|                       | Income tax provision                                                         |                                             |   | 10.9    |             |  |   | 60.3        |   |  |             | 3.6      |   |             |   | 11.8    |             |  |   | 9.7     |   |  |   | 38.3    | 
|                       | Cumulative effect of change in accounting
    principle, net of tax of $0(4) |                                             |   |        |             |  |   |            |   |  |             | 554.4    |   |             |   |        |             |  |   |        |   |  |   |        | 
|                       | Extraordinary gain, net of tax of $0(3)                                      |                                             |   |        |             |  |   | (1,076.7    | ) |  |             |         |   |             |   |        |             |  |   |        |   |  |   |        | 
|                       |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             | 
|                       | Net income (loss)                                                            |                                             | $ | (46.5   | )           |  | $ | 1,043.0     |   |  | $           | (634.5   | ) |             | $ | (396.7  | )           |  | $ | (186.2  | ) |  | $ | 47.6    | 
|                       |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             | 
|Balance Sheet Data:    |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             |  |   |         |   |  |   |        
|                       | Total assets                                                                 |                                             | $ | 2,296.6 |             |  |   |             |   |  | $           | 1,846.6  |   |             | $ | 2,358.1 |             |  | $ | 2,603.9 |   |  | $ | 2,679.9 | 
|                       | DIP facility, bank borrowings and current portion
    of long-term debt(1)   |                                             |   | 25.5    |             |  |   |             |   |  |             | 105.8    |   |             |   | 42.2    |             |  |   | 1,693.3 |   |  |   | 143.2   | 
|                       | Long-term debt                                                               |                                             |   | 752.4   |             |  |   |             |   |  |             | 61.9     |   |             |   | 91.7    |             |  |   | 94.6    |   |  |   | 1,384.6 | 
|                       | Liabilities subject to compromise(5)                                         |                                             |   |        |             |  |   |             |   |  |             | 2,133.8  |   |             |   | 2,121.0 |             |  |   |        |   |  |   |        | 
|                       | Stockholders equity (deficit)                                               |                                             |   | 595.9   |             |  |   |             |   |  |             | (1,074.4 | ) |             |   | (460.0  | )           |  |   | (21.8   | ) |  |   | 190.7   | 
|Per Share Data:        |                                                                              |                                             |   |         |             |  |   |             |   |  |             |          |   |             |   |         |             |  |   |         |   |  |   |        
|                       | Loss per share                                                               |                                             | $ | (1.55   | )           |  |   |             |   |  |             |          |   |             |   |         |             |  |   |         |   |  |   |         | 
|                       | Average number of shares outstanding (in
    thousands)                      |                                             |   | 30,011  |             |  |   |             |   |  |             |          |   |             |   |         |             |  |   |         |   |  |   |         | 



---



|    |                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note (11) to the consolidated financial
    statements included herein.                                                                                                                                         
|   
|(2) | For the four months ended May 31, 2003 and
    fiscal years ended January 31, 2003 and 2002, interest
    expense, net, excludes approximately $38.7 million,
    $117.6 million and $18.7 million, respectively, of

24



---



##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | interest expense that would have accrued from
    February 1, 2003 to May 31, 2003, from
    February 1, 2002 to January 31, 2003 and from
    December 5, 2001 to January 31, 2002, respectively,
    with respect to certain long-term debt classified as liabilities
    subject to compromise. See Note (12) to the
    consolidated financial statements included herein.



|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(3) | See Note (3) to the consolidated
    financial statements included herein. 
|   
|(4) | See Note (7) to the consolidated
    financial statements included herein. 
|   
|(5) | See Note (12) to the consolidated
    financial statements included herein.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following discussion and analysis should be
read in conjunction with the Companys Consolidated
Financial Statements, related notes thereto and the other
information included elsewhere herein.

Executive Summary



| |                 
| | ----------------
| | Company Overview

Originally founded in 1908, the Company is a
leading worldwide producer of aluminum and steel wheels for the
light vehicle market. The Company is a leading provider of steel
wheels for the commercial highway market and is also a leading
supplier in the high growth market for lightweight aluminum
products, including suspension, brake and powertrain components.
The Company is the lending supplier of automotive wheels used by
OEMs in North America and Europe. The Company has a global
footprint with 44 facilities located in 14 countries
around the world. The Company sells products to every major
North American, Japanese and European manufacturer of passenger
cars and light trucks as well as more than 300 commercial
highway vehicle customers throughout the world. The
Companys products are presently on 16 of the top
20 selling platforms for passenger cars in the United
States.

The Company sells products to every major North
American, Japanese and European manufacturer of passenger cars
and light trucks as well as more than 300 commercial
highway vehicle customers throughout the world. The Company has
a sales and marketing organization of dedicated customer teams
located in all major vehicle producing regions. The
Companys ability to support its customers globally is
further enhanced by the Companys broad global presence in
terms of sales offices, manufacturing facilities and
engineering/ technical centers.

On December 5, 2001, the Companys
wholly owned domestic subsidiaries and one wholly owned Mexican
subsidiary filed voluntary petitions under Chapter 11 of
the U.S. Bankruptcy Code. The Company emerged from
bankruptcy on June 3, 2003. In connection with the
emergence from Chapter 11, the Company entered into a
$550.0 million senior secured credit facility, as amended.
The New Credit Facility consists of a $450.0 million
six-year amortizing term loan (the New Term Loan)
and a five-year $100.0 million revolving credit facility.
In addition, HLI issued an aggregate of $250.0 million
principal amount of 10 1/2% senior notes due 2010 (the
New Senior Notes). On February 11, 2004, the
Company closed on a primary offering of 7.7 million shares
of common stock, and a secondary offering of 2.0 million
shares of its common stock. The Company used the net proceeds
that it received from the primary offering to redeem
$87.5 million aggregate principal amount, plus accrued and
unpaid interest thereon, of its outstanding New Senior Notes on
March 12, 2004, to prepay $16.0 million, plus accrued
and unpaid interest thereon, of its New Term Loan on
February 12, 2004, and for general corporate purposes.

In fiscal 2003, the Company had net sales of
$2.1 billion, with approximately 48% of the Companys
net sales for that period derived from international markets,
and the Company had earnings from operations in fiscal 2003 of
$62.0 million (which includes the impact of certain gains
and expenses related to its emergence from Chapter 11
proceedings).

25



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##### Table of Contents





| |                              
| | -----------------------------
| | Industry and Economic Factors



| |               
| | --------------
| | Opportunities:

The Company believes there are a number of
important trends in the automotive parts industry that the
Company has benefited from in the past and will continue to
benefit from in the future.



| |                                                      
| | -----------------------------------------------------
| | An increasing requirement for global
    capabilities

As a result of OEMs expanding their business
operations globally, suppliers are being required to operate in
these same global markets to obtain new business from their
customers. Few suppliers are truly global, and those that are
have a competitive advantage.



| |                                                
| | -----------------------------------------------
| | A growing demand for full service
    suppliers

Automotive OEMs are increasingly outsourcing a
greater number of vehicle components to their suppliers, and
increasingly require that their suppliers have the capabilities
to design and engineer the components they manufacture for the
OEMs. Automotive OEMs are awarding new business to those
suppliers that support the full range of design and engineering
services required to provide high quality, technologically
advanced products under shortened product development timetables.



| |                                              
| | ---------------------------------------------
| | An increasing use of aluminum in
    vehicles

Automotive OEMs are focused on increasing the
fuel efficiency of vehicles while maintaining safety and
comfort. Light metals such as aluminum provide automotive OEMs
with a way to materially reduce the overall weight of the
vehicle and improve fuel efficiencies. Aluminum penetration in
the North American wheel market is approximately 62%, as
automotive OEMs have recognized both the weight efficiencies of
aluminum and its favorable design characteristics. Aluminum
wheel penetration in Europe is approximately 33% and the Company
expects it to grow significantly as the European market looks to
both improve fuel efficiency and provide design differentiation.
The most significant growth area in the market for aluminum
vehicle parts is expected to be in the suspension components
area, where the penetration of aluminum currently is less than
half that of wheels, even though aluminum provides significant
weight saving opportunities to automotive OEMs.



| |            
| | -----------
| | Challenges:

The Company faces a number of challenges that
could negatively impact results.



| |                           
| | --------------------------
| | Customer Pricing Pressures

OEMs have been seeking ways to lower their own
costs of manufacturing which could adversely affect the
Companys business. These cost reductions may be effected
through an increased use of internal manufacturing or through
relocation of production to countries with lower-cost
structures. As production is relocated, OEMs might find it more
cost-efficient to rely on either internal manufacturing
capabilities at such relocated facilities or local or other
foreign suppliers with lower production costs. This internal
manufacturing or reliance on local or other foreign suppliers
may have a significant negative impact on the Companys
business.

Furthermore, OEMs historically have had
significant leverage over their outside suppliers because the
automotive component supply industry is fragmented and serves a
limited number of automotive OEMs. Tier 1 suppliers are
subject to substantial continuing pressure from OEMs to reduce
the price of their products. In addition, several of the
Companys major customers have announced significant
cost-cutting initiatives, which could further increase downward
pressure on pricing. If the Company is unable to generate
sufficient production cost savings in the future to offset price
reductions, its gross margin and profitability would be
adversely affected.

26



---



##### Table of Contents





| |            
| | -----------
| | Competition

The major domestic and foreign markets for the
Companys products are highly competitive. Competition is
based primarily on price, technology, quality, delivery and
overall customer service. The Companys customers have
shifted research and development, design and validation
responsibilities to their key suppliers, focusing on stronger
relationships with fewer suppliers. The Companys global
competitors include a large number of other well-established
suppliers. Competitors typically vary among each of the
Companys products and geographic markets. Furthermore, the
rapidly evolving nature of the markets in which the Company
competes may attract new domestic or international entrants. As
a result, the Companys sales levels and margins could be
adversely affected by pricing pressures caused by such new
entrants, especially in low-cost foreign markets such as China.
In addition ongoing consolidation of the automotive industry
could adversely affect the Companys business. Such
consolidation could result in a loss of some of its present
customers to competitors.



| |                       
| | ----------------------
| | Concentration of Sales

The Company derived approximately half of fiscal
2003 net sales on a worldwide basis from Ford,
DaimlerChrysler and General Motors and their subsidiaries. The
Companys sales levels and margins could be adversely
affected as a result of pricing pressures caused by new
competitors in low-cost foreign markets such as China. These
factors led to selective resourcing of future business to
competitors in the second quarter of fiscal 2003. Additionally,
these customers have been experiencing decreasing market share
in North America, which could result in lower sales volumes for
Hayes.



| |                
| | ---------------
| | Material Prices

Global spot market steel prices have
significantly increased during 2003 and into early 2004. One
factor leading to the higher prices is the increasing demand for
steel in China, industry consolidation, and rising raw material
costs. In response to the increasing cost of raw materials, a
number of steel suppliers have implemented surcharges on
existing fixed price contracts. Without the surcharge some
suppliers claim they will be unable to provide adequate supplies
of steel. In addition, some of the Companys suppliers have
sought, and others may seek in the future, bankruptcy relief
which could affect the availability or price of steel. These
factors could negatively impact the Companys results of
operations as it may be unable to compel suppliers to comply
with existing contracts or to source adequate supplies of steel.
The Company believes it can partially offset the impact of cost
increases through higher scrap sales recoveries and or by
passing some of these costs through to certain of its customers.
The Company believes it can offset the remaining impact
primarily by improved productivity and efficiency.



| |                                            
| | -------------------------------------------
| | Dependence on U.S. and Global
    Economies

A significant portion of the Companys sales
are to automotive OEMs, and therefore its financial performance
depends, in large part, on conditions in the automotive
industry, which, in turn, are generally dependent upon the U.S.
and global economies. Relatively modest declines in the
Companys customers production levels could have a
significant adverse impact on its profitability because the
Company has substantial fixed production costs. The
Companys sales are also impacted by retail inventory
levels and its customers production schedules. If the
Companys OEM customers significantly reduce their
inventory levels and reduce their orders from us, the
Companys performance would be adversely impacted. In this
environment, the Company cannot predict future production rates
or inventory levels or the underlying economic factors.
Continued uncertainty and unexpected fluctuations may have a
significant negative impact on the Companys business.

The Companys principal operations are
directly related to domestic and foreign automotive and
commercial highway vehicle production. Industry sales and
production are cyclical, and therefore can generally be affected
by the strength of the economy, by consumer spending, or in
specific regions such as North America or Europe, by prevailing
interest rates and by other factors which may have an effect on
the

27



---



##### Table of Contents



level of its sales. Any decline in the demand for
new automobiles could have a material adverse impact on the
Companys financial condition and results of operations.




| |                                   
| | ----------------------------------
| | Impact of Emerging from Bankruptcy

The bankruptcy case may adversely affect the
Companys ability to negotiate favorable terms from
suppliers, landlords and others and to attract and retain
customers. The failure to obtain such favorable terms or attract
and retain customers could adversely affect the Companys
financial performance.



| |                      
| | ---------------------
| | Impact of Debt Levels

The Company has substantial levels of debt,
including debt under the New Credit Facility, the Senior Notes
and other debt instruments. As of January 31, 2004, the
Company had $777.9 million of total indebtedness and
$48.5 million of cash and cash equivalents. The degree to
which the Company is leveraged could have important
consequences, including: requiring a substantial portion of the
Companys cash flow from operations to be dedicated to debt
service and therefore not available to the Company for
operations, capital expenditures and future business
opportunities; increasing the Companys vulnerability to a
downturn in general economic conditions or in its business; and
limiting the Companys ability to adjust to changing market
conditions, placing the Company at a competitive disadvantage
compared to its competitors that have relatively less debt.

The indenture governing the Companys Senior
Notes, New Credit Facility and other debt agreements contain a
number of significant covenants that, among other things,
restrict its ability, and the ability of its subsidiaries, to
obtain additional financing or access its revolving credit
facility in the future for capital expenditures, working capital
or general corporate purposes.



| |                       
| | ----------------------
| | Significant Strategies

While the Companys net sales are
continually affected by pressure from its major customers to
reduce prices, the Companys emphasis on reduction of
production costs, increased productivity and improvement of
production facilities has enabled the Company to respond to this
pressure. The Company continuously implements strategic
initiatives designed to improve product quality while reducing
manufacturing costs. The Company has implemented a broad range
of initiatives that have resulted in substantially improved
operating performance. The Company continues to focus on
opportunities to improve operating income including:
(a) further rationalization of manufacturing capacity;
(b) streamlining of marketing and general and
administrative overhead; (c) continued implementation of
lean manufacturing and Six Sigma initiatives; (d) efficient
investment in new equipment and technologies and the upgrading
of existing equipment; and (e) continued improvement of its
internal controls and centralization of certain aspects of its
accounting and finance functions. The Companys management
team is focused on maximizing the Companys current asset
base to improve its operational efficiency while also adapting
to the needs of customers and the market.

To meet the Companys customers
demands for the highest quality, lowest cost product delivered
globally, the Company has established manufacturing facilities
in a number of countries around the globe that have low
production costs. Additionally, a key part of the Companys
business strategy is to expand its ability to produce
low-pressure aluminum cast components. In the next two years,
the Company intends to expand existing capacity in Thailand and
the Czech Republic and to refurbish and expand the cast aluminum
wheel plant the Company recently acquired in Chihuahua, Mexico
so that it will serve the North American wheel market utilizing
low pressure casting technology. However, the Company may be
unable to successfully implement its business strategies due to
a weakening of the economy, changes in the automotive industry
or other factors.

Chapter 11 Filings and Emergence from
Chapter 11



| |                   
| | ------------------
| | Chapter 11 Filings

On December 5, 2001, Hayes Lemmerz
International, Inc. (Old Hayes), 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican
subsidiary (collectively, the Debtors) filed
voluntary petitions for reorganization relief (the
Chapter 11 Filings or the Filings)
under Chapter 11 of the

28



---



##### Table of Contents



Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware (the Bankruptcy
Court).


On December 16, 2002, certain of the Debtors
filed a proposed joint plan of reorganization with the
Bankruptcy Court. On April 9, 2003, the Debtors filed a
modified first amended joint plan of reorganization (the
Plan of Reorganization) which received the requisite
support from creditors authorized to vote thereon. The following
five Debtors were not proponents of the Plan of Reorganization
and are not subject to the terms thereof: HLI Netherlands
Holdings, Inc., CMI Quaker Alloy, Inc., Hayes Lemmerz
Funding Company, LLC, Hayes Lemmerz Funding Corporation, and
Hayes Lemmerz International Import, Inc. (collectively, the
Non-reorganizing Debtors).

The Plan of Reorganization provided for the
cancellation of the existing common stock of the Company and the
issuance of cash, new common stock in the reorganized Company
and other property to certain creditors of the Company in
respect of certain classes of claims. The Plan of Reorganization
was confirmed by an order of the Bankruptcy Court on
May 12, 2003, which order has become final and
non-appealable.



| |                              
| | -----------------------------
| | Emergence from
    Chapter 11

On June 3, 2003 (the Effective
Date), Hayes Lemmerz International, Inc. and each of
the 27 Debtors proposing the Plan of Reorganization emerged from
Chapter 11 proceedings pursuant to the Plan of
Reorganization, which was confirmed by an order of the
Bankruptcy Court on May 12, 2003, which order has become
final and non-appealable. The Non-reorganizing Debtors were not
proponents of the Plan of Reorganization and are not subject to
the terms thereof. On June 3, 2003, the Bankruptcy Court
entered an order dismissing the Chapter 11 Filings of the
Non-reorganizing Debtors.

Pursuant to the Plan of Reorganization, the
Company caused the formation of (i) a new holding company,
HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a
Delaware corporation and a wholly owned subsidiary of HoldCo
(ParentCo), and (iii) HLI Operating
Company, Inc, a Delaware corporation and a wholly owned
subsidiary of ParentCo (HLI). On the Effective Date,
(i) HoldCo was renamed Hayes Lemmerz
International, Inc. (New Hayes), (ii) New
Hayes contributed to ParentCo 30,0000,000 shares of its
common stock, par value $.01 per share (the New
Common Stock), and 957,447 series A warrants and 957,447
series B warrants to acquire New Common Stock of New Hayes (the
Series A Warrants and Series B
Warrants, respectively), (iii) ParentCo in turn
contributed such shares of New Common Stock and Series A
Warrants and Series B Warrants to HLI and
(iv) pursuant to an Agreement and Plan of Merger, dated as
of June 3, 2003 (the Merger Agreement), between
the Company and HLI, the Company was merged with and into HLI
(the Merger), with HLI continuing as the surviving
corporation.

Pursuant to the Plan of Reorganization and as a
result of the Merger, all of the issued and outstanding shares
of common stock, par value $.01 per share, of the Company
(the Old Common Stock), and any other outstanding
equity securities of the Company, including all options and
warrants, were cancelled. The holders of the existing voting
common stock of the Company immediately before confirmation did
not receive any voting shares of the emerging entity or any
other consideration under the Plan of Reorganization as a result
of their ownership interests of the Predecessor. This
represented a complete change of control in the ownership of the
Company. Promptly following the Merger, HLI distributed to
certain holders of allowed claims, under the terms of the Plan
of Reorganization, an amount in cash, the New Common Stock, the
Series A Warrants, the Series B Warrants and the
Preferred Stock (as defined below). Prior to the Merger, the Old
Common Stock was registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act). In reliance on Rule 12g-3(a) of
the Exchange Act, by virtue of the status of New Hayes as a
successor issuer to the Company, the New Common Stock is deemed
registered under Section 12(g) of the Exchange Act. The
Company filed a Form 15 with the SEC to terminate the
registration of the Old Common Stock under the Exchange Act.

Pursuant to the terms of the Plan of
Reorganization, HLI issued 100,000 shares of Preferred
Stock, par value $1.00, of HLI (the Preferred Stock)
to the holders of certain allowed claims. In accordance with the
terms of the Preferred Stock, the shares of Preferred Stock are,
at the holders option, exchangeable into a

29



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number of fully paid and nonassessable shares of
New Common Stock equal to (i) the aggregate liquidation
preference of the shares of Preferred Stock so exchanged
($100 per share plus all accrued and unpaid dividends
thereon (whether or not declared) to the exchange date) divided
by (ii) 125% of the Emergence Share Price. As
determined pursuant to the terms of the Plan of Reorganization,
the Emergence Share Price is $18.50.


In connection with the Debtors emergence
from Chapter 11, on the Effective Date, HLI entered into a
$550.0 million senior secured credit facility, as amended
by Amendment No. 1 and Waiver to Credit Agreement, dated
October 16, 2003 (as amended, the New Credit
Facility). The New Credit Facility consists of a
$450.0 million six-year amortizing term loan (the New
Term Loan) and a five-year $100.0 million revolving
credit facility (the Revolving Credit Facility). In
addition, HLI issued on the Effective Date an aggregate of
$250.0 million principal amount of 10 1/2% senior
notes due 2010 (the New Senior Notes). The proceeds
from the initial $450.0 million of borrowings under the New
Credit Facility and the net proceeds from the New Senior Notes
were used to make payments required under the Plan of
Reorganization, including the repayment of the Companys
DIP Facility and a payment of $477.3 million to certain
prepetition lenders, to pay related transaction costs and to
refinance certain debt. See Notes (3), (11) and (12) to the
consolidated financial statements included herein.



| |                     
| | --------------------
| | Reorganization Items

Reorganization items as reported in the four
months ended May 31, 2003 and the fiscal 2002 and 2001
consolidated statements of operations included herein are
comprised of income, expense and loss items that were realized
or incurred by the Debtors as a direct result of the
Companys decision to reorganize under Chapter 11.
Reorganization items were as follows (millions of dollars):

|                                                                                     |               |             |      |      |        |   |      |        |  |   |      |      | 
|------------------------------------------------------------------------------------ | ------------- | ----------- | ---- | ---- | ------ | - | ---- | ------ |  | - | ---- | ---- | 
|                                                                                     |               |            
|                                                                                     |               | Predecessor |     
|                                                                                     |               |             |     
|                                                                                     |               | Four        |      |      |       
|                                                                                     |               | Months      |      |      |       
|                                                                                     |               | Ended       |      |      |       
|                                                                                     |               | May 31,     |      |      | Fiscal |   |      | Fiscal | 
|                                                                                     |               | 2003        |      |      | 2002   |   |      | 2001   | 
|                                                                                     |               |             |      |      |        |   |      |        | 
|Write-off of deferred financing costs related to
    prepetition domestic borrowings |               | $           |     |      |        | $ |     |        |  | $ | 38.9 |     
|Critical employee retention plan provision                                           |               |             | 11.7 |      |        |   | 7.3  |        |  |   |     |     
|Estimated accrued liability for rejected
    prepetition leases                      |               |             |      |      |        |   |      |        |  |   |      |     
|                                                                                     | and contracts |             |      |     |        |   |      | 10.7   |  |   |      |     | 
|Professional fees related to the Filing                                              |               |             | 30.8 |      |        |   | 28.3 |        |  |   | 9.0  |     
|Creditors Trust obligation                                                          |               |             | 2.0  |      |        |   |     |        |  |   |     |     
|Settlement of prepetition liabilities                                                |               |             |     |      |        |   | (1.5 | )      |  |   |     |     
|Other                                                                                |               |             | 0.5  |      |        |   | (0.3 | )      |  |   | (0.1 | )   
|                                                                                     |               |             |      |      |        |   |      |        | 
|                                                                                     | Total         |             | $    | 45.0 |        |   | $    | 44.5   |  |   | $    | 47.8 | 
|                                                                                     |               |             |      |      |        |   |      |        | 

On May 30, 2002, the Bankruptcy Court
entered an order approving, among other things, the critical
employee retention plan (the CERP) filed with the
Bankruptcy Court in February 2002 which was designed to
compensate certain critical employees in order to assure their
retention and availability during the Companys
restructuring. The plan has two components which
(i) rewarded critical employees who remained with the
Company (and certain affiliates of the Company who are not
directly involved in the restructuring) during and through the
completion of the restructuring (the Retention
Bonus) and (ii) provided additional incentives to a
more limited group of the most senior critical employees if the
enterprise value upon completing the restructuring exceeded an
established baseline (the Restructuring Performance
Bonus).

Thirty-five percent, or approximately
$3.0 million, of the Retention Bonus was paid on
October 1, 2002. The remaining portion of the Retention
Bonus of approximately $5.9 million was paid on
June 13, 2003.

30



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Further, the Restructuring Performance Bonus
provided under the CERP was paid after the consummation of the
restructuring as discussed below.


Based on the Companys compromise total
enterprise value of $1,250.0 million as confirmed by the
Bankruptcy Court, the aggregate amount of the Restructuring
Performance Bonus is $12.1 million. Of the aggregate
$12.1 million, approximately $6.0 million was paid in
cash on July 1, 2003, and approximately $2.0 million
was paid on August 29, 2003 as determined by the
Companys Board of Directors. The remaining portion of the
Restructuring Performance Bonus was paid in 215,935 shares
of restricted units of New Hayes on July 28, 2003. Pursuant
to provisions contained in the CERP, the restricted units will
vest as follows, subject to the participants continued
employment:



| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | one half of the restricted units will vest on the
    first anniversary of the Effective Date, and;
|
| |  | one half of the restricted units will vest on the
    second anniversary of the Effective Date.    

Payments related to Chapter 11 filings not
discussed above consisted primarily of professional fees and
cure payments and were approximately $31.3 million and
$22.4 million during the eight months ended
January 31, 2004 and the four months ended May 31,
2003, respectively. Payments related to Chapter 11 filings
were approximately $81.7 million during fiscal 2002, and
consisted primarily of professional fee payments, critical
vendor payments, the Retention Bonus and a portion of accrued
interest and fees under the Companys prepetition credit
agreements. Cash payments with respect to reorganization items
were approximately $5.3 million in fiscal 2001, and
consisted primarily of professional fee payments.

As a result of the application of fresh start
accounting on May 31, 2003, and in accordance with
SOP 90-7, the post-emergence financial results of the
Company for the period ending January 31, 2004 are
presented as the Successor and the pre-emergence
financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor.
Comparative financial statements do not straddle the Effective
Date because in effect the Successor Company represents a new
entity. As a result of applying fresh start accounting, the
Successor will have increased depreciation and amortization
expense, no reorganization items, no fresh start accounting
adjustments and lower interest expense in comparison to the
Predecessor. Depreciation expense of the Successor is expected
to be higher annually resulting from: (a) an increase in
the carrying value of certain plant, equipment and tooling to
fair value under fresh start accounting; (b) revisions to
remaining estimated useful lives under fresh start accounting;
and (c) the increase in the carrying value of other
property, plant, equipment and tooling from refinancing certain
synthetic leases. Amortization expense of the Successor is
expected to be higher annually resulting from an increase in the
carrying value of definite-lived intangible assets to fair value
under fresh start accounting. Interest expense is expected to
decrease resulting from the Successors new capital
structure.

For purposes of the periods presented in
Managements Discussion and Analysis of Financial Condition
and Result of Operations, the Successor eight months ended
January 31, 2004 and the Predecessor four months ended
May 31, 2003 have been combined for convenience of
discussion and are collectively referred to as fiscal
2003.

Results of Operations

Sales of the Companys wheels, wheel-end
attachments, aluminum structural components and brake components
produced in North America are directly affected by the overall
level of passenger car, light truck and commercial highway
vehicle production of North American OEMs, while sales of its
wheels and automotive castings in Europe are directly affected
by the overall vehicle production in Europe. The North American
and European automotive industries are sensitive to the overall
strength of their respective economies.

The Company is organized based primarily on
markets served and products produced. Under this organization
structure, the Companys operating segments have been
aggregated into three reportable segments: Automotive Wheels,
Components and Other. The Automotive Wheels segment includes
results from the Companys operations that primarily design
and manufacture fabricated steel and cast aluminum wheels for
original equipment manufacturers in the global passenger car and
light vehicle markets. The

31



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##### Table of Contents



Components segment includes results from the
Companys operations that primarily design and manufacture
suspension, brake and powertrain components for original
equipment manufacturers in the global passenger car and light
vehicle markets. The Other segment includes results from the
Companys operations that primarily design and manufacture
wheel and brake products for commercial highway and aftermarket
customers in North America. The Other segment also includes
financial results related to the Companys tire and wheel
operations in Europe, the corporate office and elimination of
certain intercompany activities.




| |                                        
| | ---------------------------------------
| | Fiscal 2003 Compared to Fiscal
    2002



| |          
| | ---------
| | Net Sales

|                  |       |                       |         |         |      |   |         |          |  |   |       |      | 
|----------------- | ----- | --------------------- | ------- | ------- | ---- | - | ------- | -------- |  | - | ----- | ---- | 
|                  |       | 2003                  |         |         | 2002 |   |         | $ Change | 
|                  |       |                       |         |         |      |   |         |          | 
|                  |       |                      
|                  |       | (Millions of dollars) |        
|Automotive Wheels |       | $                     | 1,228.8 |         |      | $ | 1,168.8 |          |  | $ | 60.0  |     
|Components        |       |                       | 708.3   |         |      |   | 737.7   |          |  |   | (29.4 | )   
|Other             |       |                       | 119.3   |         |      |   | 95.1    |          |  |   | 24.2  |     
|                  |       |                       |         |         |      |   |         |          | 
|                  | Total |                       | $       | 2,056.4 |      |   | $       | 2,001.6  |  |   | $     | 54.8 | 
|                  |       |                       |         |         |      |   |         |          | 

The Companys net sales for the fiscal year
ended January 31, 2004 increased $54.8 million to
$2,056.4 million from $2,001.6 million in the fiscal
year ended January 31, 2003. After adjusting for the net
impact of favorable exchange rate fluctuations, relative to the
U.S. dollar, net sales for the first fiscal year of 2003
declined 4.2% or approximately $84 million as compared to
the same period in 2002.

Net sales from the Companys Automotive
Wheels segment increased $60.0 million to
$1,228.8 million in fiscal year 2003 from
$1,168.8 million in fiscal year 2002. Automotive Wheels net
sales were favorably impacted by foreign exchange rate
fluctuations relative to the U.S. dollar, which increased
sales by approximately $118 million, and also by favorable
product mix. These increases were partially offset by decreased
unit pricing and lower customer production requirements in North
America primarily due to the termination and balancing out of
certain programs.

Net sales from Components decreased
$29.4 million to $708.3 million in fiscal 2003 from
$737.7 million in fiscal 2002. The decrease in Components
net sales was primarily due to lower customer production
requirements, the termination and balancing out of certain
programs and lower unit pricing, which was partially offset by a
more favorable product mix. Net sales in fiscal 2002 were
$16 million higher, compared to fiscal 2003, due to the
closure of the Companys Petersburg, Michigan facility and
the sale of the Companys Maulbronn, Germany foundry in
fiscal 2002. This was offset by the impact of favorable foreign
exchange rate fluctuations, which increased net sales by
approximately $20 million.

Other net sales increased $24.2 million to
$119.3 million during fiscal 2003 from $95.1 million
during fiscal 2002. This increase was primarily due to higher
volumes in the Companys commercial highway and aftermarket
operations, as trailer production builds continued to increase
in fiscal 2003 from 2002.



| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Earnings (loss) from operations excluding
    fresh start accounting adjustments and reorganization
    items

Earnings (loss) from operations excluding fresh
start accounting adjustments and reorganization items is used as
a non-GAAP measure of the Companys primary profitability
measure because it excludes fresh start accounting adjustments
and reorganization items which do not represent normal operating
performance of the Company as these items relate only to the
Companys Chapter 11 Filings and emergence. Earnings
(loss)

32



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##### Table of Contents



from operations excluding fresh start accounting
adjustments and reorganization items is calculated as follows
(millions of dollars):


|                                                                                                   |                                    |      |      |       |      |   |      |      | 
|-------------------------------------------------------------------------------------------------- | ---------------------------------- | ---- | ---- | ----- | ---- | - | ---- | ---- | 
|                                                                                                   |                                    | 2003 |      |       | 2002 |  
|                                                                                                   |                                    |      |      |       |      |  
|Earnings (loss) from operations                                                                    |                                    | $    | 62.0 |       |      | $ | (0.3 | )   
|Excluding:                                                                                         |                                    |      |      |       |      |   |      |     
|                                                                                                   | Fresh start accounting adjustments |      |      | (63.1 | )    |   |      |     | 
|                                                                                                   | Reorganization items               |      |      | 45.0  |      |   |      | 44.5 | 
|                                                                                                   |                                    |      |      |       |      |  
|Earnings from operations excluding fresh start
    accounting adjustments and reorganization items |                                    | $    | 43.9 |       |      | $ | 44.2 |     
|                                                                                                   |                                    |      |      |       |      |  

The following tables present earnings (loss) from
operations excluding fresh start accounting adjustments and
reorganization items, as well as other information by segment
(millions of dollars):

|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |       |   |       |   |   |   |       |       |       |  
|--------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------ | ---- | ----- | ---------- | - | ---- | ----- | ----- | - | ----- | - | - | - | ----- | ----- | ----- | -
|                                                                                                          |                                                |                                                             
|                                                                                                          |                                                | 2003                                                         |     
|                                                                                                          |                                                |                                                              |     
|                                                                                                          |                                                | Automotive                                                   |      |       |           
|                                                                                                          |                                                | Wheels                                                       |      |       | Components |   |      | Other |       |   | Total |  
|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |       |   |       |  
|Earnings (loss) from operations excluding fresh
    start accounting adjustments and reorganization items |                                                | $                                                            | 57.6 |       |            | $ | 9.3  |       |       | $ | (23.0 | ) |   | $ | 43.9  |      
|Fresh start accounting adjustments                                                                        |                                                |                                                              | 57.9 |       |            |   | 27.7 |       |       |   | (22.5 | ) |   |   | 63.1  |      
|Reorganization items                                                                                      |                                                |                                                              | (0.1 | )     |            |   | 0.2  |       |       |   | (45.1 | ) |   |   | (45.0 | )    
|                                                                                                         
|Asset impairments and other restructuring charges:                                                        |                                                |                                                              |      |       |            |   |      |       |       |   |       |   |   |   |       |      
|                                                                                                          | Impairment of manufacturing facilities         |                                                              | $    | (1.5  | )          |   | $    | (0.9  | )     |   | $     |  |   |   | $     | (2.4  | )    
|                                                                                                          | Impairment of machinery, equipment and tooling |                                                              |      | (21.4 | )          |   |      | (10.0 | )     |   |       |  |   |   |       | (31.4 | )    
|                                                                                                          | Facility closure costs                         |                                                              |      | (0.9  | )          |   |      |      |       |   |       |  |   |   |       | (0.9  | )    
|                                                                                                          | Severance and other restructuring costs        |                                                              |      | (0.6  | )          |   |      |      |       |   |       |  |   |   |       | (0.6  | )    
|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |       |   |       |  
|                                                                                                          |                                                | Total asset impairments and other restructuring
    charges: |      | $     | (24.4      | ) |      | $     | (10.9 | ) |       | $ |  |   |       | $     | (35.3 | )
|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |       |   |       |  

|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |      |   |       |      |      |   |       |       |       |  
|--------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------ | ---- | ----- | ---------- | - | ---- | ----- | ---- | - | ----- | ---- | ---- | - | ----- | ----- | ----- | -
|                                                                                                          |                                                |                                                             
|                                                                                                          |                                                | 2002                                                         |     
|                                                                                                          |                                                |                                                              |     
|                                                                                                          |                                                | Automotive                                                   |      |       |           
|                                                                                                          |                                                | Wheels                                                       |      |       | Components |   |      | Other |      |   | Total |     
|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |      |   |       |     
|Earnings (loss) from operations excluding fresh
    start accounting adjustments and reorganization items |                                                | $                                                            | 40.5 |       |            | $ | 26.1 |       |      | $ | (22.4 | )    |      | $ | 44.2  |      
|Reorganization items                                                                                      |                                                |                                                              | (8.0 | )     |            |   | (1.0 | )     |      |   | (35.5 | )    |      |   | (44.5 | )    
|                                                                                                         
|Asset impairments and other restructuring charges:                                                        |                                                |                                                              |      |       |            |   |      |       |      |   |       |      |      |   |       |      
|                                                                                                          | Impairment of manufacturing facilities         |                                                              | $    | (1.7  | )          |   | $    | (0.8  | )    |   | $     |     |      |   | $     | (2.5  | )    
|                                                                                                          | Impairment of machinery, equipment and tooling |                                                              |      | (25.1 | )          |   |      | (0.8  | )    |   |       | (0.5 | )    |   |       | (26.4 | )    
|                                                                                                          | Facility closure costs                         |                                                              |      | (6.7  | )          |   |      |      |      |   |       |     |      |   |       | (6.7  | )    
|                                                                                                          | Severance and other restructuring costs        |                                                              |      | (2.9  | )          |   |      | (1.0  | )    |   |       | (4.0 | )    |   |       | (7.9  | )    
|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |      |   |       |     
|                                                                                                          |                                                | Total asset impairments and other restructuring
    charges: |      | $     | (36.4      | ) |      | $     | (2.6 | ) |       | $    | (4.5 | ) |       | $     | (43.5 | )
|                                                                                                          |                                                |                                                              |      |       |            |   |      |       |      |   |       |     

The Companys earnings from operations
excluding fresh start accounting adjustments and reorganization
items decreased by $0.3 million in fiscal 2003 to
$43.9 million, from earnings of $44.2 million in
fiscal 2002. Adjusted for the net impact of foreign exchange
rate fluctuations relative to the U.S. dollar, the
Companys earnings from operations excluding fresh start
accounting adjustments and reorganization items decreased by
approximately $12 million from fiscal 2002. This decline is
primarily driven by a $25.5 million increase in
depreciation and amortization expense due primarily to the
adoption of fresh start accounting upon the

33



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##### Table of Contents



Companys emergence from Chapter 11.
Improved operating performance and a favorable product mix
improved earnings from operations by $43 million, but were
partially offset by lower OEM production requirements and
increased pricing pressures of $33 million.


Earnings from operations excluding fresh start
accounting adjustments and reorganization items at the
Companys Automotive Wheels operations increased by
$17.1 million from fiscal 2002 compared to the same period
in 2003. The Companys Automotive Wheels segment recorded
asset impairment losses and other restructuring charges of
$24.4 million in 2003 and $36.4 million in fiscal
2002. It recorded asset impairment losses when it determined,
based on its most recent sales projections, that its current
estimate of the future undiscounted cash flows from certain of
its facilities would not be sufficient to recover the carrying
value of the fixed assets and production tooling at those
facilities and also when managements plan for the future
use of machinery and equipment changed. In fiscal 2003,
Automotive Wheels recorded asset impairment losses and
restructuring charges of $5.7 million at its
La Mirada, California facility, $6.4 million at its
Gainesville, Georgia operations, and $8.8 million at its
Howell, Michigan facility. The Automotive Wheels segment also
recorded $3.5 million of impairment losses and other
restructuring costs at various facilities in fiscal 2003.
Further, on April 1, 2004 the Company announced the closure
of its Howell, Michigan facility. During fiscal 2002, Automotive
Wheels recorded asset impairment losses of $15.5 million at
its La Mirada, California facility, $3.3 million of
impairment losses at its Sedalia, Missouri facility and
$2.2 million at the Companys Howell, Michigan
facility, as well as $8.6 million in impairment losses and
facility closure costs related to its Somerset, Kentucky
facility and $6.8 million in impairment losses and other
restructuring costs at various facilities. The remaining
increase in Automotive Wheels earnings from operations excluding
fresh start accounting adjustments and reorganization items is
due primarily to improved operating performance and favorable
fluctuations in foreign exchange rates relative to the
U.S. dollar which improved earnings from operations
excluding fresh start accounting adjustments and reorganization
items by approximately $23 million and $10 million,
respectively. This was partially offset by lower OEM production
requirements in North America and increased pricing and customer
satisfaction pressures which decreased earnings from operations
by approximately $19 million. Higher depreciation and
amortization expense primarily related to the Companys
adoption of fresh start accounting upon emergence from
Chapter 11 decreased earnings from operations excluding
fresh start accounting adjustments and reorganization items by
approximately $6 million. Earnings from operations
excluding fresh start accounting adjustments and reorganization
items for fiscal 2003 also includes absorption of the
$3.6 million fair value adjustment to inventory included in
the Successors opening balance sheet which negatively
impacted earnings.

Components earnings from operations excluding
fresh start accounting adjustments and reorganization items
decreased by $16.8 million in fiscal 2003 compared to the
same period in fiscal 2002. During fiscal 2003 and 2002,
Components recorded asset impairment losses and restructuring
charges of $10.9 million and $2.6 million,
respectively, at various facilities. Components recorded asset
impairment losses of $7.5 million in 2003 when it
determined, based on its most recent sales projections, that its
current estimate of the future undiscounted cash flows from the
Wabash, Indiana facility would not be sufficient to recover
the carrying value of that facilitys building, fixed
assets and production tooling. Improved operating performance
and higher value added sales increased earnings from operations
excluding fresh start accounting adjustments and reorganization
items by approximately $22 million during fiscal 2003. This
increase was offset by lower OEM production requirements and
increased pricing pressures which decreased earnings from
operations by $19 million, as well as the $1.6 million
fair value adjustment to inventory included in the
Successors opening balance sheet which negatively impacted
earnings. Higher depreciation and amortization expense, due
primarily to the Companys adoption of fresh start
accounting during emergence from Chapter 11, decreased
earnings from operations excluding fresh start accounting
adjustments and reorganization items by approximately
$11 million.

Loss from operations excluding fresh start
accounting adjustments and reorganization items in the
Companys Other segment increased by $0.6 million in
fiscal 2003. Subsequent to the Companys emergence from
Chapter 11, it continued to incur post-emergence
bankruptcy-related professional fees, and it also established a
long term incentive plan for senior management during 2003,
which combined decreased earnings from operations by
approximately $10 million. This was partially offset by
increased volumes and

34



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##### Table of Contents



improved operating performance in the
Companys commercial highway and aftermarket operations.
Earnings from the Companys other segment were also
negatively impacted in fiscal 2002 by $4.0 million of
restructuring costs, primarily related to an early retirement
program.




| |                      
| | ---------------------
| | Interest Expense, net

Interest expense, net, was $64.8 million for
fiscal 2003 compared to $72.7 million for fiscal 2002.
Interest expense, net, between the two periods is not comparable
because of the Companys new capital structure established
upon emergence from Chapter 11. See Notes (1) and
(11) to the consolidated financial statements included
herein regarding the Companys new capital structure.

Further, interest expense, net, for fiscal 2003
includes a $1.1 million increase to interest income as a
result of adjusting to fair value the Companys outstanding
Series A Warrants and Series B Warrants, which are
recorded as liabilities on the consolidated balance sheet as of
January 31, 2004.



| |             
| | ------------
| | Income Taxes

Income tax expense was $71.2 million for
fiscal 2003 compared to $3.6 million for fiscal 2002. This
expense is the result of deferred taxes of approximately
$46.0 million relating to fresh start accounting
adjustments in foreign jurisdictions, $6.5 million of state
tax related to the taxable merger between the Predecessor and
HLI, and tax related to operations in foreign jurisdictions as
well as in various states. The Company has determined that a
valuation allowance is required against all net deferred tax
assets in the United States and certain deferred tax assets in
foreign jurisdictions. As such, there is no United States
federal income tax benefit recorded against current losses.



| |                                        
| | ---------------------------------------
| | Fiscal 2002 Compared to Fiscal
    2001



| |          
| | ---------
| | Net Sales

|                  |       |                       |         |         |      |   |         |          |  |   |       |       |  
|----------------- | ----- | --------------------- | ------- | ------- | ---- | - | ------- | -------- |  | - | ----- | ----- | -
|                  |       | 2002                  |         |         | 2001 |   |         | $ Change | 
|                  |       |                       |         |         |      |   |         |          | 
|                  |       |                      
|                  |       | (Millions of dollars) |        
|Automotive Wheels |       | $                     | 1,168.8 |         |      | $ | 1,232.8 |          |  | $ | (64.0 | )    
|Components        |       |                       | 737.7   |         |      |   | 657.9   |          |  |   | 79.8  |      
|Other             |       |                       | 95.1    |         |      |   | 148.4   |          |  |   | (53.3 | )    
|                  |       |                       |         |         |      |   |         |          | 
|                  | Total |                       | $       | 2,001.6 |      |   | $       | 2,039.1  |  |   | $     | (37.5 | )
|                  |       |                       |         |         |      |   |         |          | 

The Companys net sales for fiscal 2002 were
$2,001.6 million, a decrease of 1.8% as compared to net
sales of $2,039.1 million in fiscal 2001. This decrease is
primarily due to the impact of lower sales to light vehicle OEMs
and heavy-duty vehicle manufacturers in North America.

Net sales from the Companys Automotive
Wheels segment decreased $64.0 million to
$1,168.8 million in fiscal 2002 from $1,232.8 million
in fiscal 2001. Net sales from the Companys North American
wheel operations decreased by approximately $84 million
from fiscal 2002 to fiscal 2001, due primarily to lower OEM
production requirements and the closure of the Somerset,
Kentucky aluminum wheel facility. Net sales from the
Companys international wheel operations increased by
approximately $20 million, due primarily to favorable
changes in product mix and the impact of foreign exchange
fluctuations. This increase was partially offset by lower
pass-through pricing and the sale of the Companys
Brazilian agriculture wheel business.

Net sales from Components increased
$79.8 million to $737.7 million in fiscal 2002 from
$657.9 million in fiscal 2001. The increase is primarily
due to new program launches at the Companys Montague,
Michigan facility and at the Companys other suspension
component operations that increased sales by approximately
$105 million. This was partially offset by the impact of
the closure of the Companys Petersburg, Michigan facility
and the sale of the Companys Maulbronn, Germany foundry
during the second quarter of 2002, which reduced net sales by
approximately $44 million during 2002. The remainder of the
increase in Components net sales is primarily due to higher
volumes on existing platforms.

35



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##### Table of Contents



Other net sales decreased $53.3 million to
$95.1 million in fiscal 2002 from $148.4 million in
fiscal 2001. Net sales from the Companys commercial
highway and aftermarket operations were approximately
$28 million lower in fiscal 2002 compared to 2001 due
primarily to abnormally high military wheel shipments in fiscal
2001 and lower North American heavy duty trailer production in
fiscal 2002. The remaining decrease in Other net sales is
primarily due to the sale of the Companys European system
service business during the fourth quarter of fiscal 2001.



| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Earnings (loss) from operations excluding
    fresh start accounting adjustments and reorganization
    items

Earnings (loss) from operations excluding fresh
start accounting adjustments and reorganization items is
calculated as follows (millions of dollars):

|                                                                                                          |                                    |      |      |      |      |   |        |      | 
|--------------------------------------------------------------------------------------------------------- | ---------------------------------- | ---- | ---- | ---- | ---- | - | ------ | ---- | 
|                                                                                                          |                                    | 2002 |      |      | 2001 |  
|                                                                                                          |                                    |      |      |      |      |  
|Earnings (loss) from operations                                                                           |                                    | $    | (0.3 | )    |      | $ | (210.6 | )   
|Excluding:                                                                                                |                                    |      |      |      |      |   |        |     
|                                                                                                          | Fresh start accounting adjustments |      |      |     |      |   |        |     | 
|                                                                                                          | Reorganization items               |      |      | 44.5 |      |   |        | 47.8 | 
|                                                                                                          |                                    |      |      |      |      |  
|Earnings (loss) from operations excluding fresh
    start accounting adjustments and reorganization items |                                    | $    | 44.2 |      |      | $ | (162.8 | )   
|                                                                                                          |                                    |      |      |      |      |  

The following tables present earnings (loss) from
operations excluding fresh start accounting adjustments and
reorganization items, as well as other information by segment
(millions of dollars):

|                                                                                                         |                                                |                                                              |      |       |            |   |      |       |      |   |       |      |      |   |       |       |       |  
|-------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------ | ---- | ----- | ---------- | - | ---- | ----- | ---- | - | ----- | ---- | ---- | - | ----- | ----- | ----- | -
|                                                                                                         |                                                |                                                             
|                                                                                                         |                                                | 2002                                                         |     
|                                                                                                         |                                                |                                                              |     
|                                                                                                         |                                                | Automotive                                                   |      |       |           
|                                                                                                         |                                                | Wheels                                                       |      |       | Components |   |      | Other |      |   | Total |     
|                                                                                                         |                                                |                                                              |      |       |            |   |      |       |      |   |       |     
|Earnings (loss) from operations excluding fresh
    start accounting adjustment and reorganization items |                                                | $                                                            | 40.5 |       |            | $ | 26.1 |       |      | $ | (22.4 | )    |      | $ | 44.2  |      
|Reorganization items                                                                                     |                                                |                                                              | (8.0 | )     |            |   | (1.0 | )     |      |   | (35.5 | )    |      |   | (44.5 | )    
|                                                                                                        
|Asset impairments and other restructuring charges:                                                       |                                                |                                                              |      |       |            |   |      |       |      |   |       |      |      |   |       |      
|                                                                                                         | Impairment of manufacturing facilities         |                                                              | $    | (1.7  | )          |   | $    | (0.8  | )    |   | $     |     |      |   | $     | (2.5  | )    
|                                                                                                         | Impairment of machinery, equipment and tooling |                                                              |      | (25.1 | )          |   |      | (0.8  | )    |   |       | (0.5 | )    |   |       | (26.4 | )    
|                                                                                                         | Facility closure costs                         |                                                              |      | (6.7  | )          |   |      |      |      |   |       |     |      |   |       | (6.7  | )    
|                                                                                                         | Severance and other restructuring costs        |                                                              |      | (2.9  | )          |   |      | (1.0  | )    |   |       | (4.0 | )    |   |       | (7.9  | )    
|                                                                                                         |                                                |                                                              |      |       |            |   |      |       |      |   |       |     
|                                                                                                         |                                                | Total asset impairments and other restructuring
    charges: |      | $     | (36.4      | ) |      | $     | (2.6 | ) |       | $    | (4.5 | ) |       | $     | (43.5 | )
|                                                                                                         |                                                |                                                              |      |       |            |   |      |       |      |   |       |     

|                                                                                                         |                                                |                                                              |        |       |            |   |       |       |       |   |       |      |      |   |        |       |        |  
|-------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------ | ------ | ----- | ---------- | - | ----- | ----- | ----- | - | ----- | ---- | ---- | - | ------ | ----- | ------ | -
|                                                                                                         |                                                |                                                             
|                                                                                                         |                                                | 2001                                                         |       
|                                                                                                         |                                                |                                                              |       
|                                                                                                         |                                                | Automotive                                                   |        |       |           
|                                                                                                         |                                                | Wheels                                                       |        |       | Components |   |       | Other |       |   | Total |     
|                                                                                                         |                                                |                                                              |        |       |            |   |       |       |       |   |       |     
|Earnings (loss) from operations excluding fresh
    start accounting adjustment and reorganization items |                                                | $                                                            | (113.2 | )     |            | $ | (53.6 | )     |       | $ | 4.0   |      |      | $ | (162.8 | )    
|Reorganization items                                                                                     |                                                |                                                              |       |       |            |   |      |       |       |   | (47.8 | )    |      |   | (47.8  | )    
|                                                                                                        
|Asset impairments and other restructuring charges:                                                       |                                                |                                                              |        |       |            |   |       |       |       |   |       |      |      |   |        |      
|                                                                                                         | Impairment of manufacturing facilities         |                                                              | $      | (43.6 | )          |   | $     | (36.9 | )     |   | $     |     |      |   | $      | (80.5 | )     
|                                                                                                         | Impairment of machinery, equipment and tooling |                                                              |        | (29.6 | )          |   |       | (10.7 | )     |   |       |     |      |   |        | (40.3 | )     
|                                                                                                         | Facility closure costs                         |                                                              |        | (11.0 | )          |   |       | (0.6  | )     |   |       |     |      |   |        | (11.6 | )     
|                                                                                                         | Severance and other restructuring costs        |                                                              |        | (2.7  | )          |   |       | (0.2  | )     |   |       | (6.3 | )    |   |        | (9.2  | )     
|                                                                                                         |                                                |                                                              |        |       |            |   |       |       |       |   |       |     
|                                                                                                         |                                                | Total asset impairments and other restructuring
    charges: |        | $     | (86.9      | ) |       | $     | (48.4 | ) |       | $    | (6.3 | ) |        | $     | (141.6 | )
|                                                                                                         |                                                |                                                              |        |       |            |   |       |       |       |   |       |     

36



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##### Table of Contents



The Companys earnings from operations
excluding fresh start accounting adjustments and reorganization
items increased by $207.0 million to $44.2 million in
fiscal 2002 from a loss of $162.8 million in fiscal 2001.
Adjusted for the net impact of foreign exchange rate
fluctuations relative to the U.S. dollar, the
Companys fiscal 2002 earnings from operations excluding
fresh start accounting adjustments and reorganization items
increased by approximately $204.7 million from fiscal 2001.

Earnings from operations excluding reorganization
items at the Companys Automotive Wheels operations
increased approximately $153.7 million from fiscal 2002
compared to the same period in 2001. The Companys
Automotive Wheels segment recorded asset impairment losses and
restructuring charges of $36.4 million in 2002 and
$86.9 million in fiscal 2001. The asset impairment losses
were recorded when the Company determined, based on its most
recent sales projections, that its current estimate of the
future undiscounted cash flows from the facilities would not be
sufficient to recover the carrying value of that facilitys
fixed assets and production tooling and also when
managements plan for the future use of machinery and
equipment changed. During fiscal 2002, Automotive Wheels
recorded asset impairment losses of $15.5 million at its
LaMirada, California facility, $3.3 million at its Sedalia,
Missouri facility, $2.2 million at its Howell, Michigan
facility, $8.6 million in impairment losses and facility
closure costs related to its Somerset, Kentucky facility and
$6.8 million in impairment losses and other restructuring
costs at various facilities. In fiscal 2001, the Companys
North American Wheels operations recorded asset impairment
losses of $42.7 million and closures costs of
$10.7 million at its Bowling Green, Kentucky facility,
$6.8 million of impairment losses at its Somerset, Kentucky
facility, and $12.9 million of impairment losses and other
restructuring costs at various other operations in North
America. In fiscal 2001, the Companys International Wheels
facilities recorded $11.1 million of asset impairment
losses at its Königswinter, Germany facility, and
$2.7 million in employee restructuring costs at various
international operations. Operating performance improved
$48 million in 2002 compared to the same period in 2001 as
a result of the Companys closure of the Companys
Somerset, Kentucky facility during the first quarter of 2002 and
the winding down of the Bowling Green facility. Improved
manufacturing performance and favorable product mix in global
wheel operations further increased earnings by approximately
$63 million. Automotive Wheels also recorded approximately
$14 million lower depreciation and amortization expense in
fiscal 2002 due primarily to the asset impairments recorded in
2001-2002 and the change in accounting for goodwill. The
Companys loss on its joint venture in Mexico decreased
earning from operations approximately $4 million in fiscal
2001. The remaining changes in earnings were due primarily to
lower volumes in North America, lower pricing and the sale of
the Brazilian agricultural wheel business in fiscal 2001.

Earnings (loss) from operations excluding
reorganization items at the Companys Components operations
increased approximately $79.7 million from fiscal 2002
compared to the same period in 2001. The Companys
Components segment recorded asset impairment losses and
restructuring charges of $2.6 million in 2002 and
$48.4 million in fiscal 2001. Components recorded asset
impairment losses when it determined, based on its most recent
sales projections, that its current estimate of the future
undiscounted cash flows from the facilities would not be
sufficient to recover the carrying value of that facilitys
fixed assets and production tooling and also when
managements plan for the future use of machinery and
equipment changed. During fiscal 2001, Components recorded asset
impairment losses of $28.5 million and closure costs of
$0.6 million related to the Companys Petersburg,
Michigan facility and an impairment loss of $8.4 million
for its foundry located in Maulbronn, Germany, which was later
sold in 2002. Components also recorded asset impairment losses
of $10.9 million, related to changes in managements
plan for the future use of idled machinery and equipment due
primarily to changes in product mix at various North American
operations. Improved operating performance and higher volumes
increased Components earnings by approximately $37 million
in 2002 from 2001. Components also recorded approximately
$11 million lower amortization expense in fiscal 2002 due
to the change in accounting for goodwill. The remaining change
in Components earnings is due primarily to lower pricing and
substantial program launch and start-up costs recorded at the
Companys Montague, Michigan facility during the first half
of fiscal 2002.

Earnings (loss) from operations excluding fresh
start accounting adjustments and reorganization items in the
Companys Other segment decreased $26.4 million from
earnings of $4.0 million in fiscal 2001 to a loss of
$22.4 million in 2002. The Companys Other segment
recorded approximately $7 million higher pension and
post-retiree medical expenses in fiscal 2002 related to its
North American operations. Lower sales in the

37



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##### Table of Contents



Companys commercial highway operations
negatively impacted earnings by approximately $4 million in
fiscal 2002 compared to fiscal 2001. Earnings in the Other
segment were also approximately $3 million lower in fiscal
2002 due to the sale of the Companys European systems
service business during the fourth quarter of fiscal 2001. The
remaining changes in Other earnings was due primarily to the
centralization of certain corporate functions in North America
and performance-based incentive compensation earned in fiscal
2002.




| |                      
| | ---------------------
| | Interest Expense, net

Interest expense was $72.7 million for
fiscal 2002 compared to $175.2 million in fiscal 2001. This
decease reflects the discontinuation of interest accrued on the
Companys Senior Notes and Senior Subordinated Notes, as
well as lower interest rates.



| |             
| | ------------
| | Income Taxes

Taxes on income for fiscal 2002 were
$3.6 million of expense despite the pre-tax loss for the
year. This tax expense is primarily the result of taxes in
foreign jurisdictions and various states reduced by
approximately $14.3 million in United States federal income
tax benefits recorded for the loss carry back claims resulting
from United States federal income tax law changes. In assessing
the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. A valuation
allowance was recorded against all net deferred tax assets in
the United States and certain deferred tax assets recorded at
various international locations. The tax expense recorded during
fiscal 2002 as a result of the increase in the required
valuation allowance was $81.6 million.

Implementation of a plan of reorganization under
Chapter 11 is expected to reduce the availability of some
or all of the Companys net operating loss carryforwards
and other tax attributes, and is expected to impact the tax
basis of certain long-lived assets.



| |                                    
| | -----------------------------------
| | Liquidity and Capital
    Resources



| |           
| | ----------
| | Cash Flows

Operating
Activities:The Companys
operations provided $115.0 million in cash during
fiscal 2003 compared to $105.7 million during
fiscal 2002. This increase is primarily due to the
improvement in domestic vendor payment terms, decreased
inventory levels and higher profits, offset by higher tax and
interest payments.

Investing
Activities:Cash used for investing
activities increased by $66.5 million for fiscal 2003
compared to fiscal 2002. The primary items impacting the
use of cash included higher capital expenditure spending, the
purchase of certain equipment in fiscal 2003 that was
previously leased, and an increase in cash used for the purchase
of two businesses in fiscal 2003.

Capital expenditures for fiscal 2003 were
primarily for additional machinery and equipment to improve
productivity and reduce costs, to meet demand for new vehicle
platforms and to meet expected requirements for the
Companys products. The Company anticipates that capital
expenditures for fiscal 2004 will be approximately
$150 million relating primarily to meeting demand for new
vehicle platforms and supporting maintenance and cost reduction
programs (including approximately $12 million for
renovation and expansion of its Mexican aluminum wheel plant).

Financing
Activities:Cash provided by financing
activities increased by $12.5 million for fiscal 2003
compared to fiscal 2002. The Company received proceeds of
$14.5 million from borrowings in fiscal 2002. During
fiscal 2003, the Company received proceeds of
$242.8 million and $436.1 million from its New Senior
Notes and New Term Loan, respectively, net of any discounts and
related fees. These proceeds were used to make payments required
under the Plan of reorganization, including a
$477.3 million payment to prepetition lenders, and a
$13.0 million payment to holders of Old Senior Notes.
Additionally, the Company repaid debt, borrowings and notes
payable in the amount of $161.6 million during
Fiscal 2003.

38



---



##### Table of Contents





| |                     
| | --------------------
| | Sources of Liquidity

The principal sources of liquidity for the
Companys future operating, capital expenditure, facility
closure, restructuring and reorganization requirements are
expected to be (i) cash flows from operations,
(ii) proceeds from the sale of non-core assets and
businesses, (iii) cash on hand, and (iv) borrowings
under the $100 million Revolving Credit Facility under the
New Credit Facility. While the Company expects that such sources
will meet these requirements, there can be no assurances that
such sources will prove to be sufficient, in part, due to
inherent uncertainties about applicable future capital market
conditions.

The Company is currently in the process of
implementing operational improvements, which consist of a number
of cost-cutting and profit-enhancing initiatives. If the
implementation of the operational improvements is not
successful, the Company may be unable to offer products at a
competitive price to generate sufficient operating funds to pay
the interest on the Senior Notes and make payments due under its
New Credit Facility. In such event, there can be no assurance
that alternative sources of financing would be available to the
Company or, if available, that such financing would be on
commercially reasonable terms.



| |                        
| | -----------------------
| | Other Liquidity Matters

As more fully discussed in Note (20), Subsequent
Events, to the consolidated financial statements included
herein, on February 11, 2004 the Company closed on a
primary offering of approximately 7.7 million shares of
common stock, including approximately 1.3 million shares to
cover over-allotments, and a secondary offering of
2.0 million shares of its common stock. The Company used
the net proceeds that it received from the primary offering to
redeem $87.5 million aggregate principal amount of its
outstanding New Senior Notes on March 12, 2004, to prepay
$16.0 million of its New Term Loan on February 12,
2004, and for general corporate purposes.

On November 13, 2003, the Company acquired
an additional 35% ownership interest in its Turkish joint
venture for $13.9 million in cash and will pay an
additional $1.1 million in the first quarter of fiscal
2004. As a result of this acquisition, the Company owns 60% of
the subsidiary, Hayes Lemmerz Jantas Jant Sanayi ve Ticaret
A.S., which is now a consolidated subsidiary of the Company
beginning in the fourth quarter of fiscal 2003. As part of this
transaction, the Company sold an approximate 7.8% interest in
another Turkish subsidiary, Hayes Lemmerz  Inci Jant
Sanayi A.S., for $2.4 million. This sale reduced the
Companys holdings in Hayes Lemmerz  Inci Jant
Sanayi A.S. to 60%.

On January 15, 2004, the Company acquired a
cast aluminum wheel plant located in Chihuahua, Mexico for
$15.7 million, of which $5.2 million was paid at
closing, and the remainder of $10.5 million will be paid in
the first half of fiscal 2004. The Chihuahua plant was formerly
operated as part of a joint venture in which the Company owned a
minority interest. Following planned refurbishment and expansion
of the plant, it will serve the North American wheel market
utilizing low pressure casting technology.

As more fully discussed above, on June 3,
2003, in connection with the Companys emergence from
Chapter 11, HLI entered into the $550.0 million New
Credit Facility, consisting of the $450.0 million New Term
Loan and the $100.0 million Revolving Credit Facility. HLI
also issued an aggregate of $250.0 million New Senior
Notes. The Company and substantially all of its material direct
and indirect domestic subsidiaries have guaranteed HLIs
obligations under the New Credit Facility, and the Company and
substantially all of its domestic subsidiaries have guaranteed
HLIs obligations under the New Senior Notes. The proceeds
from the initial $450.0 million of borrowings under the New
Credit Facility and the net proceeds from the New Senior Notes
were used to make payments required under the Plan of
Reorganization. As of April 6, 2004, there were no
outstanding borrowings and $20.5 million in letters of
credit issued under the Revolving Credit Facility. The amount
available to borrow under the revolving credit facility at
April 6, 2004 was approximately $79.5 million.

In addition, upon the Companys emergence
from bankruptcy, all of the Companys existing securities,
including the Old Common Stock, Old Senior Notes and Old
Subordinated Notes, were cancelled. All amounts outstanding
under the Prepetition Credit Agreement were satisfied in
exchange for: (i) a cash payment of $477.3 million;
(ii) 15,930,000 shares of New Common Stock; and
(iii) 53,100 shares of Preferred

39



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##### Table of Contents



Stock. All amounts outstanding under the Old
Senior Notes were satisfied in exchange for: (i) a cash
payment of approximately $13.0 million;
(ii) 13,470,000 shares of New Common Stock;
(iii) 44,900 shares of Preferred Stock; and
(iv) a portion of the distributions from the trust
established under the Plan of Reorganization for the benefit of
the prepetition creditors (the Creditors
Trust). All amounts outstanding under the Old Subordinated
Notes were satisfied in exchange for a distribution of
Series A Warrants and a portion of the distributions under
the Creditors Trust. In addition, holders of unsecured
claims will receive an aggregate amount of 600,000 shares
of New Common Stock, 2,000 shares of Preferred Stock, the
Series B Warrants and a portion of the distributions under
the Creditors Trust.


Upon emergence from Chapter 11, the Company:
(i) repaid the DIP Facility in full; (ii) settled
certain of the operating leases discussed below; and
(iii) paid certain other costs and expenses pursuant to the
Plan of Reorganization.

Certain of the Companys operating leases
covering leased assets with an original cost of approximately
$68.0 million contained provisions which, if certain events
occur or conditions were met, including termination of the
lease, could have required the Company to purchase or re-sell
the leased assets within a specified period of time, generally
one year, based on amounts specified in the lease agreements. In
connection with the Companys emergence from
Chapter 11, the Company purchased these assets for
$23.6 million.



| |               
| | --------------
| | Credit Ratings

|                             |  |     |     |  |         |  |     | 
|---------------------------- |  | --- | --- |  | ------- |  | --- | 
|                             |  | S&P |     |  | Moodys | 
|                             |  |     |     |  |         | 
|Corporate & Bank Debt rating |  |     | BB- |  |         |  | Ba3 | 
|Senior Note rating           |  |     | B+  |  |         |  | B1  | 

In the event of a downgrading, the Company
believes it would continue to have access to sufficient
liquidity, however, the cost of borrowing would increase and our
ability to access certain financial markets could be limited.



| |                                
| | -------------------------------
| | Significant Financial Covenants

The indenture governing the Companys Senior
Notes, New Credit Facility and other debt agreements contain a
number of significant covenants that, among other things,
restrict its ability, and the ability of its subsidiaries, to:



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | declare dividends or redeem or repurchase capital
    stock;                                  
|
| |  | prepay, redeem or purchase debt, including the
    Senior Notes;                              
|
| |  | incur liens and engage in sale-leaseback
    transactions;                                    
|
| |  | make loans and investments;                                                                   
|
| |  | incur additional debt, including borrowings under
    the Companys revolving credit facility;
|
| |  | amend or otherwise alter certain debt documents;                                              
|
| |  | make capital expenditures;                                                                    
|
| |  | engage in mergers, acquisitions and asset sales;                                              
|
| |  | enter into transactions with affiliates; and                                                  
|
| |  | alter the business the Company conducts.                                                      

In addition, under the New Credit Facility the
Company is required to satisfy certain financial covenants,
including covenants regarding a maximum total leverage ratio, a
minimum interest coverage ratio and a minimum fixed charge
coverage ratio, and the Company may become subject to additional
or more restrictive covenants in connection with any future
borrowing. The Companys ability to comply with these
covenants may be affected by events beyond its control. If the
Company is unable to comply with the covenants under

40



---



##### Table of Contents



the indenture governing the Senior Notes, the New
Credit Facility or any of its other debt instruments, there
would be a default which, if not waived, could result in
acceleration of the Companys debt and its bankruptcy if
the Company were unable to repay the amounts owed. Additionally,
a default resulting from the Companys failure to comply
with such covenants or the applicable borrowing conditions would
preclude it from borrowing additional funds. Compliance with the
covenants could cause the Company to conduct its business, or to
forgo opportunities, in such a manner as to materially harm the
business.


Although the agreement governing the New Credit
Facility and the indenture governing the Senior Notes impose
limits on the Companys ability to incur additional debt,
the Company may incur significant additional debt in the future.
The degree to which the Company will be leveraged could have
important consequences, including:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | requiring a substantial portion of the
    Companys cash flow from operations to be dedicated to debt
    service and therefore not available to the Company for
    operations, capital expenditures and future business
    opportunities;
|
| |  | increasing the Companys vulnerability to a
    downturn in general economic conditions or in its business;                                                                                                                                  
|
| |  | limiting the Companys ability to adjust to
    changing market conditions, placing the Company at a competitive
    disadvantage compared to its competitors that have relatively
    less debt; and                                        
|
| |  | limiting the Companys ability to obtain
    additional financing or access its revolving credit facility in
    the future for capital expenditures, working capital or general
    corporate purposes.                                     



| |        
| | -------
| | Outlook



| |          
| | ---------
| | Customers

The Company derived approximately half of its
fiscal 2003 net sales on a worldwide basis from Ford,
DaimlerChrysler and General Motors and their subsidiaries. The
Companys sales levels and margins could be adversely
affected as a result of pricing pressures caused by new
competitors in low-cost foreign markets, such as China. These
factors led to selective resourcing of future business to
competitors in the second quarter of fiscal 2003. Additionally,
these customers have been experiencing decreasing market share
in North America which could result in lower sales volumes for
the Company.

The Companys net sales are continually
affected by pressure from its major customers to reduce prices.
The Companys emphasis on reduction of production costs,
increased productivity and improvement of production facilities
has enabled the Company to respond to this pressure.



| |             
| | ------------
| | Steel Supply

Global spot market steel prices have
significantly increased during 2003 and into early 2004. Factors
leading to the higher prices include the increasing demand for
steel in China, industry consolidation and rising raw material
costs. In response to the increasing cost of raw materials, a
number of steel suppliers have implemented surcharges on
existing fixed price contracts. Without the surcharge some
suppliers claim they will be unable to provide adequate supplies
of steel. In addition, some of the Companys suppliers have
sought, and others may seek in the future, bankruptcy relief
which could affect the availability or price of steel. These
factors could negatively impact the Companys results of
operations as it may be unable to compel suppliers to comply
with existing contracts or to source adequate supplies of steel.
The Company believes it can partially offset the impact of cost
increases through higher scrap sales recoveries and or by
passing some of these costs through to certain of its customers.
The full impact of steel prices is uncertain given the
volatility in the spot steel market.



| |                                                         
| | --------------------------------------------------------
| | Interest Rate and Foreign Exchange Rate
    Fluctuations

A portion of the Companys debt, including
its borrowings under the New Credit Facility, bears interest at
variable rates. Any increase in the interest rates on the
Companys debt will reduce funds available to it for

41



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its operations and future business opportunities
and will exacerbate the consequences of its leveraged capital
structure.


Due to the increase in the Companys
operations outside the United States, the Company has
experienced increased foreign currency exchange gains and losses
in the ordinary course of business. As a result, fluctuations in
the exchange rate between the U.S. dollar, the euro and the
currencies of other countries in which the Company conducts its
business may have a material impact on its financial condition
as cash flows generated in other currencies will be used, in
part, to service its dollar-denominated debt. This could result
in an increase in the Companys overall leverage and could
result in less cash flow available for debt repayment should the
dollar appreciate significantly versus other currencies in which
significant cash flows are generated.

In addition, fluctuations in foreign currency
exchange rates may affect the value of the Companys
foreign assets as reported in U.S. dollars, which in turn
may adversely affect reported earnings and, accordingly, the
comparability of period-to-period results of operations. Changes
in currency exchange rates may affect the relative prices at
which the Company and foreign competitors sell products in the
same market. In addition, changes in the value of the relevant
currencies may affect the cost of certain items required in its
operations. There can be no assurance that fluctuations in
interest rates or exchange rates will not have a material
adverse effect on the Companys financial condition or
results of operations, or cause significant fluctuations in
quarterly and annual results of operations.



| |                        
| | -----------------------
| | Postretirement Benefits

On December 8, 2003, President George W.
Bush signed the Medicare Prescription Drug, Improvement and
Modernization Act (the Act) into law. This law introduces a
prescription drug benefit under Medicare as well as a federal
subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to the
benefit established by the law.

In January 2004, the Financial Accounting
Standards Board (FASB) issued FASB Staff Position
No. FAS 106-1, Accounting and Disclosure
Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003
(FSP 106-1). FSP 106-1 permits companies
that are a sponsor of a postretirement heath care plan that
provides a prescription drug benefit to either include the
effects of the Act in its financial statements or defer
accounting for the Act until the FASB issues guidance on
how to account for the federal subsidy. The company has elected
to defer accounting for the effects of the Act until specific
guidance is issued by the FASB.

As such, the accumulated postretirement benefit
obligation (APBO) and the net periodic postretirement benefit
cost do not reflect the effects of the Act. Future guidance on
the accounting for the federal subsidy is pending and that
guidance, when issued, could require changes to previously
reported information. The Company is unable to estimate the
impact the Act will have on its financial statements or the
amount of cash it may be entitled to receive from any federal
subsidy, but believes that its plan is at least actuarially
equivalent. As such, the Act is expected to favorably impact the
Company by reducing the postretirement benefit obligation and
expense in future periods when compared to fiscal 2003.

42



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| |                        
| | -----------------------
| | Contractual Obligations

The following table identifies the Companys
significant contractual obligations (millions of dollars):

|                                                          |                   |                       |      |      |       |   |      |       |  |   |         |      |  |       |       |       |  |   |       |       | 
|--------------------------------------------------------- | ----------------- | --------------------- | ---- | ---- | ----- | - | ---- | ----- |  | - | ------- | ---- |  | ----- | ----- | ----- |  | - | ----- | ----- | 
|                                                          |                   |                      
|                                                          |                   | Payment due by Period |     
|                                                          |                   |                       |     
|                                                          |                   | Less than             |      |      | 1-3   |   |      | 4-5   |  |   | After   |      |  |      
|                                                          |                   | 1 Year                |      |      | Years |   |      | Years |  |   | 5 Years |      |  | Total |      
|                                                          |                   |                       |      |      |       |   |      |       |  |   |         |      |  |       |      
|Long-term debt(1)                                         |                   | $                     | 7.0  |      |       | $ | 22.1 |       |  | $ | 18.9    |      |  | $     | 596.0 |       |  | $ | 644.0 |      
|Redeemable preferred stock of subsidiary                  |                   |                       |     |      |       |   |     |       |  |   |        |      |  |       | 10.5  |       |  |   | 10.5  |      
|Short-term borrowings                                     |                   |                       | 2.6  |      |       |   |     |       |  |   |        |      |  |       |      |       |  |   | 2.6   |      
|Notes payable issued in conjunction with
    acquisitions |                   |                       | 11.6 |      |       |   |     |       |  |   |        |      |  |       |      |       |  |   | 11.6  |      
|Capital lease obligations                                 |                   |                       | 4.3  |      |       |   | 5.9  |       |  |   | 6.0     |      |  |       |      |       |  |   | 16.2  |      
|Operating leases                                          |                   |                       | 13.1 |      |       |   | 13.0 |       |  |   | 1.0     |      |  |       |      |       |  |   | 27.1  |      
|Capital expenditures                                      |                   |                       | 9.7  |      |       |   |     |       |  |   |        |      |  |       |      |       |  |   | 9.7   |      
|                                                          |                   |                       |      |      |       |   |      |       |  |   |         |      |  |       |      
|                                                          | Total obligations |                       | $    | 48.3 |       |   | $    | 41.0  |  |   | $       | 25.9 |  |       | $     | 606.5 |  |   | $     | 721.7 | 
|                                                          |                   |                       |      |      |       |   |      |       |  |   |         |      |  |       |      



---



|    |                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes $87.5 million aggregate principal
    amount of New Senior Notes redeemed on March 12, 2004, and
    $16.0 aggregate principal amount of New Term Loan Facility
    pre-paid on February 12, 2004. See Notes (11) and (20)
    to the consolidated financial statements included herein.



| |                        
| | -----------------------
| | Other Cash Requirements

The Company anticipates the following approximate
significant cash requirements to be paid in fiscal 2004
(millions of dollars):

|                                                  |  |   |      | 
|------------------------------------------------- |  | - | ---- | 
|Interest                                          |  | $ | 44.7 | 
|Taxes                                             |  |   | 26.0 | 
|Short-term incentive compensation                 |  |   | 9.0  | 
|Pension and other postretirement benefits funding |  |   | 28.4 | 
|Restructuring costs(1)                            |  |   | 10.0 | 
|Various customer satisfaction issues              |  |   | 7.0  | 






|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Notes (14) and (20) to the consolidated
    financial statements included herein for a discussion of
    restructuring and other closure costs.



| |             
| | ------------
| | Market Risks

In the normal course of business the Company is
exposed to market risks arising from changes in foreign exchange
rates, interest rates and raw material and utility prices. The
Company selectively uses derivative financial instruments to
manage these risks, but does not enter into any derivative
financial instruments for trading purposes.



| |                 
| | ----------------
| | Foreign Exchange

The Company has global operations and thus makes
investments and enters into transactions in various foreign
currencies. In order to minimize the risks associated with
global diversification, the Company first seeks to internally
net foreign exchange exposures, and uses derivative financial
instruments to hedge any remaining net exposure. The Company
uses forward foreign currency exchange contracts on a limited
basis to reduce the earnings and cash flow impact of
non-functional currency denominated transactions. The gains and
losses from these hedging instruments generally offset the gains
or losses from the hedged items and are recognized in the same
period the hedged items are settled. The Company also uses
forward foreign currency exchange contracts to hedge its net
investment in certain of its foreign subsidiaries. The net
impact of such hedges is recorded as currency translation
adjustments within other comprehensive income (loss).

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The value of the Companys consolidated
assets and liabilities located outside the United States (which
are translated at period end exchange rates) and income and
expenses (which are translated using average rates prevailing
during the period), generally denominated in the Euro and the
Brazilian Real, are affected by the translation into the
Companys reporting currency (the U.S. Dollar). Such
translation adjustments are reported as a separate component of
stockholders equity. Foreign exchange rate fluctuations
could have an increased impact on the Companys reported
results of operations. However, due to the self-sustaining
nature of the Companys foreign operations (which maintain
their own credit facilities, enter into borrowings and incur
costs in their respective local currencies), the Company
believes it can effectively manage the effect of these currency
fluctuations. In addition, in order to further hedge against
such currency rate fluctuations, the Company has, from time to
time, entered into certain foreign currency swap arrangements.
Additionally, foreign exchange rate fluctuations effect the
comparability of year over year operating results.

The Company periodically analyzes the impact of
foreign exchange fluctuations related to its forward foreign
currency exchange contracts on earnings and has determined that,
at January 31, 2004, excluding the translation effects
referred to above, a hypothetical 10% adverse movement in
foreign exchange rates would not have a material effect on
earnings, fair values or cash flows related to these forward
foreign currency exchange contracts.



| |               
| | --------------
| | Interest Rates

The Company generally manages its risk associated
with interest rate movements through the use of a combination of
variable and fixed rate debt. Under the Companys
post-emergence capital structure at January 31, 2004,
approximately $470.3 million of the Companys debt was
variable rate debt. A hypothetical 10% adverse movement in the
interest rate on variable rate debt would affect earnings by
approximately $2 - 3 million on an annual basis.
Approximately $248.6 million of the Companys debt was
fixed rate debt at January 31, 2004. A hypothetical 10%
adverse movement in interest rates would result in a loss in the
fair value of this fixed rate debt of approximately
$6.9 million.



| |            
| | -----------
| | Commodities

The Company relies upon the supply of certain raw
materials and other inputs in its production process and has
entered into firm purchase commitments for aluminum and steel.
The Company manages the exposures associated with these
commitments primarily through the terms of its supply and
procurement contracts. Additionally, the Company uses forward
contracts to hedge against changes in certain specific commodity
prices of the purchase commitments outstanding. The Company had
no significant forward contracts during fiscal 2004 and 2003.



| |              
| | -------------
| | Other Matters



| |          
| | ---------
| | Inflation

The Company does not believe that sales of its
products are materially affected by inflation, although there
can be no assurance that such an effect will not occur in the
future. In accordance with industry practice, the costs or
benefits of fluctuations in aluminum prices are passed through
to customers. In the United States, the Company adjusts the
sales prices of its aluminum wheels every one to six months, if
necessary, to fully reflect any increase or decrease in the
price of aluminum. As a result, the Companys net sales of
aluminum wheels are adjusted, although gross profit per wheel is
not materially affected. From time to time, the Company enters
into futures contracts or purchase commitments solely to hedge
against possible aluminum price changes that may occur between
the dates of aluminum wheel price adjustments. Pricing and
purchasing practices are similar in Europe, but opportunities to
recover increased material costs from customers are more limited
than in the United States.

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| |                                     
| | ------------------------------------
| | Technological and Regulatory Changes

Changes in legislative, regulatory or industry
requirements or in competitive technologies may render certain
of the Companys products obsolete or less attractive. The
Companys ability to anticipate changes in technology and
regulatory standards and to successfully develop and introduce
new and enhanced products on a timely basis will be a
significant factor in the Companys ability to remain
competitive. There can be no assurance that the Company will be
able to achieve the technological advances that may be necessary
for the Company to remain competitive or that certain of the
Companys products will not become obsolete. The Company is
also subject to the risks generally associated with new product
introductions and applications, including lack of market
acceptance, delays in product development and failure of
products to operate properly.



| |                         
| | ------------------------
| | International Operations

Approximately 48% of the Companys net sales
in fiscal 2003 were derived from sales in foreign markets. The
Company expects sales from international markets to continue to
represent a substantial portion of net sales. Risks inherent in
international operations include the following:



| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | agreements may be difficult to enforce and
    receivables difficult to collect through a foreign
    countrys legal system;                                                                                               
|
| |  | foreign customers may have longer payment cycles;                                                                                                                                                                           
|
| |  | foreign countries may impose additional
    withholding taxes or otherwise tax the Companys foreign
    income, impose tariffs or adopt other restrictions on foreign
    trade or investment, including exchange controls;
|
| |  | United States export licenses may be difficult to
    obtain;                                                                                                                                                               
|
| |  | intellectual property rights may be more
    difficult to enforce in foreign countries;                                                                                                                                     
|
| |  | political or economic conditions in the countries
    in which the Company operates could have an adverse effect on
    its earnings from operations in those countries;                                                    
|
| |  | unexpected adverse changes in foreign laws or
    regulatory requirements may occur;                                                                                                                                        
|
| |  | compliance with a variety of foreign laws and
    regulations may be difficult; and                                                                                                                                         
|
| |  | differing foreign tax structures may subject the
    Company to additional taxes or affect the Companys ability
    to repatriate cash from its foreign subsidiaries in a
    tax-efficient manner.                        

Any of these factors could have a material
adverse effect on the Companys business, financial
condition and results of operations.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Influence on the Companys Board of
    Directors by Significant Stockholders

Under the Companys Plan of Reorganization
upon its emergence from bankruptcy, holders of certain claims
received distributions of shares of the Companys common
stock. AP Wheels, LLC (Apollo), holds
approximately 9.2% of the Companys common stock as of
April 1, 2004. Additionally, based on the most recent
information made available to us, Amalgamated Gadget, L.P.
(Amalgamated Gadget), for and on behalf of a fund
managed by Amalgamated Gadget, holds approximately 7.6% of the
Companys common stock. Additionally, based on the most
recent information made available to us, Deutsche Bank AG
holds approximately 5.2% of the Companys common stock. The
members of AP Wheels, LLC are various funds managed by
Apollo Management V, L.P. (Apollo
Management). Apollo, funds managed by Apollo Management
and Amalgamated Gadget could acquire additional shares in the
future. Other than Apollo, Amalgamated Gadget and Deutsche Bank
AG, the Company is not aware of any other person or entity that
owns or controls 5% or more of its common stock. Apollo, Apollo
Management and Amalgamated Gadget are in the business of making
investments in, and acquiring, other companies, and may from
time to time hold interests in companies that compete directly
or indirectly with us.

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Additionally, the lenders under the
Companys Prepetition Credit Agreement collectively
received approximately 53% of its common stock upon emergence
from bankruptcy, and the former holders of the Companys
11.875% senior notes due 2006 (Old Senior
Notes) collectively received an aggregate of approximately
45% of the Companys common stock (including the
approximately 18.1% received by Apollo and the approximately
9.5% received by Amalgamated Gadget). If Apollo, Amalgamated
Gadget and/or other holders of a significant number of shares of
the Companys common stock were to act as a group, such
holders could be in a position to control the outcome of actions
requiring stockholder approval, such as an amendment to the
Companys certificate of incorporation, the authorization
of additional shares of capital stock, and any merger,
consolidation, sale of all or substantially all of the
Companys assets, and could prevent or cause a change of
control of Hayes, all of which may adversely affect the market
price of its common stock.

Moreover, each of Apollo, the administrative
agent under the Prepetition Credit Agreement, the ad hoc
committee of lenders under the Prepetition Credit Agreement (the
Ad Hoc Prepetition Lender Steering Committee) and
the former holders of Old Senior Notes have designated members
of the Companys initial board of directors. Other than
Mr. Clawson, all of the Companys initial board
members were newly appointed members upon the Companys
emergence from bankruptcy.



| |                             
| | ----------------------------
| | Critical Accounting Policies

The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Considerable judgment is often
involved in making these determinations; the use of different
assumptions could result in significantly different results.
Management believes its assumptions and estimates are reasonable
and appropriate; however, actual results could differ from those
estimates.



| |                                                            
| | -----------------------------------------------------------
| | Asset impairment losses and other
    restructuring charges

The Companys consolidated statements of
operations included herein reflect an element of operating
expenses described as asset impairments and other restructuring
charges. The Company periodically evaluates whether events and
circumstances have occurred that indicate that the remaining
useful life of any of its long lived assets may warrant revision
or that the remaining balance might not be recoverable. When
factors indicate that the long lived assets should be evaluated
for possible impairment, the Company uses an estimate of the
future undiscounted cash flows generated by the underlying
assets to determine if a write-down is required. If a write-down
is required, the Company adjusts the book value of the impaired
long-lived assets to their estimated fair values. Fair value is
determined through third party appraisals or discounted cash
flow calculations. The related charges are recorded as an asset
impairment or, in the case of certain exit costs in connection
with a plant closure or restructuring, a restructuring or other
charge in the consolidated statements of operations.

As discussed above and in the notes to the
Companys consolidated financial statements included
herein, a number of decisions have occurred or other factors
have indicated that these types of charges are required to be
currently recognized. There can be no assurance that there will
not be additional charges based on future events and that the
additional charges would not have a materially adverse impact on
the Companys financial position and results of operations.



| |                                                            
| | -----------------------------------------------------------
| | Pension and Postretirement Benefits Other than
    Pensions

Annual net periodic expense and benefit
liabilities under the Companys defined benefit plans are
determined on an actuarial basis. Assumptions used in the
actuarial calculations have a significant impact on plan
obligations and expense. Each October, the Company reviews the
actual experience compared to the more significant assumptions
used and makes adjustments to the assumptions, if warranted. The
healthcare trend rates are reviewed with the actuaries based
upon the results of their review of claims experience.

46



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Discount rates are based upon an expected benefit
payments duration analysis and the equivalent average yield rate
for high-quality fixed-income investments.


Pension benefits are funded through deposits with
trustees and the expected long-term rate of return on fund
assets is based upon actual historical returns modified for
known changes in the market and any expected change in
investment policy. Postretirement benefits are not funded and
Company policy is to pay these benefits as they become due.

Certain accounting guidance, including the
guidance applicable to pensions, does not require immediate
recognition of the effects of a deviation between actual and
assumed experience or the revision of an estimate. This approach
allows the favorable and unfavorable effects that fall within an
acceptable range to be netted. Although this netting occurs
outside the basic financial statements, the net amount is
disclosed as an unrecognized gain or loss in the footnotes to
the Companys financial statements. In accordance with the
fresh start accounting provisions of SOP 90-7, all
previously unrecognized gains or losses were immediately
recognized at the emergence date.

The Company expects to incur approximately
$9.0 million of pension expense and $10.9 million of
retiree benefit expense in fiscal 2004.



| |                            
| | ---------------------------
| | Goodwill Impairment Testing

On February 1, 2002, the Company adopted
Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets.
Under SFAS No. 142, goodwill and other
indefinite-lived intangible assets are no longer amortized;
rather those assets must be tested for impairment annually.
Other definite-lived intangible assets continue to be amortized
over their estimated lives. (See Note (7).)

The Successor Company has changed its annual test
date from January 31st to November 1st for testing
whether goodwill is impaired. This change is both preferable and
allowed in that (1) choosing the 1st day of the
4th quarter allows adequate time to perform the first step
of the test and, if necessary, the second step of the test while
still providing time to report the impact of the test in the
Companys periodic filings, (2) the successor Company
has never chosen a test date for goodwill impairment,
(3) goodwill of the Predecessor Company was eliminated as a
result of fresh start accounting, and (4) the Predecessor
Company no longer exists. The Company will test goodwill for
impairment as of November 1st of each fiscal year, or more
frequently should circumstances change or events occur that
would more likely than not reduce the fair value of a reporting
unit below its carrying amount, as provided for in
SFAS No. 142.



| |                                     
| | ------------------------------------
| | Allowance for uncollectible accounts

The allowance for uncollectible accounts provides
for losses believed to be inherent within the Companys
Receivables, (primarily trade receivables).
Management evaluates both the creditworthiness of specific
customers and the overall probability of losses based upon an
analysis of the overall aging of receivables, past collection
trends and general economic conditions. Management believes,
based on its review, that the allowance for uncollectibles is
adequate to cover potential losses. Actual results may vary as a
result of unforeseen economic events and the impact those events
could have on the Companys customers.



| |                                                       
| | ------------------------------------------------------
| | Valuation allowances on deferred income tax
    assets

In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. The Company
determined that it could not conclude that it was more likely
than not that the benefits of certain deferred income tax assets
would be realized. As a result of managements assessment,
a valuation allowance was recognized. The valuation allowance
recorded by the Company reduces to zero the net carrying value
of all United States and certain foreign net deferred tax
assets. The Company expects the deferred tax assets, net of the
valuation allowance, to be realized as a result of the reversal
of

47



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existing taxable temporary differences in the
United States and as a result of projected future taxable income
and the reversal of existing taxable temporary differences in
certain foreign locations.




| |                                                         
| | --------------------------------------------------------
| | Valuation of Series A Warrants and
    Series B Warrants

The Companys Series A Warrants and
Series B Warrants are classified as liabilities that were
initially measured at fair value and will subsequently be
measured at fair value with changes in fair value recognized in
interest expense. The fair value of the Series A Warrants
and Series B Warrants at emergence was approximately
$9.3 million. As of January 31, 2004, the fair value
of the Series A Warrants and Series B Warrants was
approximately $8.2 million. The Series A Warrants and
Series B Warrants were valued utilizing the Black-Scholes
model that requires the estimation of several variables in the
formula.



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In December 2003, the FASB issued Statement
No. 132 (revised), Employers Disclosures about
Pensions and Other Postretirement Benefits
(SFAS No. 132). SFAS No. 132
revises employers disclosures about pension plans and
other postretirement benefit plans. It does not change the
measurement or recognition of those plans required by FASB
Statements No. 87, Employers Accounting for
Pensions, No. 88, Employers Accounting
for Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination Benefits, and No. 106,
Employers Accounting for Postretirement Benefits
Other Than Pensions. SFAS No. 132 retains the
disclosure requirements contained in FASB Statement
No. 132, Employers Disclosures about Pensions
and Other Postretirement Benefits, which it replaces. It
requires additional disclosures to those in the original
Statement 132 about the assets, obligations, cash flows,
and net periodic benefit cost of defined benefit pension plans
and other defined benefit postretirement plans. The required
information should be provided separately for pension plans and
for other postretirement benefit plans. Adoption of the
disclosure requirements of SFAS No. 132 are included
in the notes to the consolidated financial statements included
herein.

In May 2003, the FASB issued Statement
No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity
(SFAS No. 150). SFAS No. 150
requires that certain classes of free-standing financial
instruments that embody obligations for entities be classified
as liabilities. Generally, SFAS No. 150 is effective
for financial instruments entered into or modified after
May 31, 2003 and is otherwise effective at the beginning of
the first interim period beginning after June 15, 2003. In
accordance with the provisions of SFAS No. 150, the
redeemable preferred stock of HLI Operating Company, Inc.,
a subsidiary of the Company, is classified as a liability in the
consolidated balance sheet as of January 31, 2004. Other
than this classification, the adoption of SFAS No. 150
did not have a material impact on the financial position or
results of operations of the Company. In November 2003, the FASB
issued FASB Staff Position No. 150-3, Effective Date,
Disclosures, and Transition for Mandatorily Redeemable Financial
Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests under FASB
Statement 150, which indefinitely deferred the
SFAS No. 150 measurement requirements for mandatorily
redeemable financial instruments. Accordingly, the redeemable
preferred stock of HLI Operating Company, Inc. is
recorded at its fair value upon issuance, plus accrued but
unpaid dividends thereon, as of January 31, 2004.

In April 2003, the FASB issued Statement
No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities
(SFAS No. 149). SFAS No. 149
amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS 149 is generally effective
for contracts entered into or modified after June 30, 2003.
The provisions of SFAS No. 149 are required to be
applied prospectively. The adoption of SFAS No. 149
did not have a material impact on its financial position or
results of operations.

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##### Table of Contents



In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities. Interpretation No. 46 provides guidance for
identifying a controlling interest in a Variable Interest Entity
(VIE) established by means other than voting interests.
Interpretation No. 46 also requires consolidation of a VIE
by an enterprise that holds such a controlling interest when it
is determined that the investor will absorb a majority of the
VIEs expected losses or residual returns, if they occur.
The effective date for this Interpretation is July 1, 2003.
Adoption of this pronouncement did not have any effect on the
Companys financial position or results of operations.

In December 2002, the Emerging Issues Task Force
(EITF) issued EITF Issue 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables. EITF 00-21 provides guidance on
determining whether a revenue arrangement contains multiple
deliverable items and if so, requires revenue be allocated
amongst the different items based on fair value. EITF 00-21
also requires revenue on any item in a revenue arrangement with
multiple deliverables not delivered completely must be deferred
until delivery of the item is completed. The effective date of
this Issue for the Company is July 1, 2003. Adoption of
this pronouncement did not have a material effect on the
financial statements of the Company.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    about Market Risk

The response to this Item is set forth above in
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations, under the heading
Market Risks.






|        |                                                             
|------- | ------------------------------------------------------------
|Item 8. | Consolidated Financial Statements and
    Supplementary Data

The response to this Item is submitted in the
Companys Consolidated Financial Statements and Notes to
Consolidated Financial Statements filed herewith, beginning at
page F-1.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Definition of Controls

Management of the Company, including the
Companys Chief Executive Officer and Chief Financial
Officer, has designed, or caused to be designed, and maintained
disclosure controls and procedures, as defined in Exchange Act
Rules 13a-15 and 15d-15 (the Disclosure Controls and
Procedures), to reasonably assure that material
information is recorded, processed, summarized and reported
within the time periods specified by the SECs rules and
forms and to reasonably assure that such information is
accumulated and communicated to management, including the
Companys Chief Executive Officer and Chief Financial
Officer, in a timely manner to allow for appropriate decisions
regarding required disclosures. Management has also designed
internal controls, including internal controls over financial
reporting (the Internal Controls), to provide
reasonable assurance regarding the reliability of the
Companys financial reporting and the preparation of the
Companys financial statements in accordance with
accounting principles generally accepted in the United States
(GAAP).

Limitations on the Effectiveness of
Controls

As more fully discussed in the American Institute
of Certified Public Accountants (AICPA) auditing
standards pronouncement Consideration Of Internal Control
in a Financial Statement Audit, AU Section 319,
paragraphs .21 to .24, an internal control system, no matter how
well designed and operated, can provide only reasonable, not
absolute, assurance that the control objectives will be met.
Limitations inherent in any system of internal controls might
include, among other things, (i) faulty human judgment and
simple errors or mistakes, (ii) collusion of two or more
people or inappropriate management override of procedures,
(iii) imprecision in estimating and judging cost-benefit
relationships in designing controls and (iv) reductions in
the effectiveness of one deterring component (such as a strong
cultural and governance environment) by a

49



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conflicting component (such as may be found in
certain management incentive plans). Because of such inherent
limitations in any system of internal controls, no evaluation of
controls can provide absolute assurance that all weaknesses or
instances of fraud, if any, have been detected.


The Company, including its Chief Executive
Officer and Chief Financial Officer, believes that the
aforementioned limitations apply to any applicable system of
internal controls, including the Disclosure Controls and
Procedures and Internal Controls. The Company will continue the
process of identifying and implementing corrective actions where
required to improve the effectiveness of its Disclosure Controls
and Procedures and Internal Controls. Significant supplemental
resources may continue to be required to prepare the required
financial and other information during this ongoing process.

Evaluation of Disclosure Controls and
Procedures

The Company maintains a disclosure committee
reporting to the Chief Executive Officer of the Company to
assist the Chief Executive Officer and Chief Financial Officer
in fulfilling their responsibility in designing, establishing,
maintaining and reviewing the Companys Disclosure Controls
and Procedures (the Disclosure Committee). The
Disclosure Committee is currently chaired by the Companys
Chief Financial Officer and includes the Companys General
Counsel, Vice President of Human Resources and Administration,
Corporate Controller, Treasurer, Director of Corporate
Accounting, Director of Internal Audit, and Manager of Financial
Reporting and Governance as its other members. As of the end of
the period covered by this report, the Companys Chief
Executive Officer and Chief Financial Officer, along with the
Disclosure Committee, evaluated the Companys Disclosure
Controls and Procedures. The Companys Chief Executive
Officer and Chief Financial Officer have concluded, subject to
the limitations noted above, that the Disclosure Controls and
Procedures are effective based on such evaluation.

Changes in Internal Controls

There were no significant changes in the
Companys Internal Controls or in other factors that have
materially affected, or are reasonably likely to
affect, Internal Controls over financial reporting during
the most recent fiscal quarter.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

Information regarding directors of the Company,
including those who are standing for re-election, is set forth
under Election of Directors in the Companys
Notice of Annual Meeting of Shareholders and Proxy Statement to
be filed within 120 days after the Companys fiscal
year ended January 31, 2004 (the Proxy
Statement), which information is incorporated herein by
reference.

50



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##### Table of Contents



Directors and Executive Officers Following the
Reorganization

The following table sets out the names and ages
of the Companys current executive officers and their
positions, followed by a description of their business
experience during the past five years. All positions shown are
with the Company or its subsidiaries unless otherwise indicated.
All executive officers are elected by the Board of Directors and
serve at its pleasure. There are no family relationships among
any of the executive officers, and there is no arrangement or
understanding between any of the executive officers and any
other person pursuant to which he was selected as an officer.
Unless otherwise indicated, each individual below is a
U.S. citizen and the business address of each individual
is: 15300 Centennial Drive, Northville, Michigan 48167.

|                     |  |     |    |  |          |                                                                                      
|-------------------- |  | --- | -- |  | -------- | -------------------------------------------------------------------------------------
|Name                 |  | Age |    |  | Position
|                     |  |     |    |  |         
|Curtis J. Clawson    |  |     | 44 |  |          | President, Chief Executive Officer and Chairman
    of the Board                     
|James A. Yost        |  |     | 54 |  |          | Vice President, Finance and Chief Financial
    Officer                              
|Patrick C. Cauley    |  |     | 44 |  |          | Vice President, General Counsel and Secretary                                        
|Brian J. OLoughlin  |  |     | 47 |  |          | Vice President  Information Technology
    and Chief Information Officer            
|James L. Stegemiller |  |     | 52 |  |          | Vice President  President, North
    American Wheels                                
|Scott T. Harrison    |  |     | 39 |  |          | Vice President  President, Suspension
    Components                                
|Daniel M. Sandberg   |  |     | 44 |  |          | Vice President  President, Automotive
    Brake Components and Powertrain Components
|Fred Bentley         |  |     | 38 |  |          | Vice President  President,
    International Wheels                                 
|Edward W. Kopkowski  |  |     | 41 |  |          | Vice President  President, Commercial
    Highway and Aftermarket Services          
|John A. Salvette     |  |     | 48 |  |          | Vice President  Business Development                                                
|Michael J. Edie      |  |     | 54 |  |          | Vice President  Materials and Logistics                                             
|Larry Karenko        |  |     | 54 |  |          | Vice President  Human Resources and
    Administration                              

Curtis J. Clawson,President, Chief Executive Officer and Chairman of the Board,
has held such positions since August 2001 (President and Chief
Executive Officer) and September 2001 (Chairman). Most recently,
from 1999 to July 2000, Mr. Clawson was President and Chief
Operating Officer of American National Can, a $2.5 billion
NYSE traded manufacturing company. Mr. Clawson has
11 years of experience in the automotive industry. He began
his career in automotive-related businesses at Arvin Industries
where he spent 9 years, from 1986 to 1995, including:
(i) a position as General Manager of the business unit that
supplied Arvin exhaust products; (ii) tenures in sales and
marketing; and (iii) tenures in production and plant
management. From 1995 until the time that he joined American
National Can, Mr. Clawson worked for Allied
Signal, Inc. as President of Allieds Filters (Fram)
and Spark Plugs (Autolite) Group, a $500 million automotive
components business, and then President of Allieds
Laminate Systems Group. Mr. Clawson earned his Bachelor of
Science and Bachelor of Arts degrees from Purdue University and
a Masters of Business Administration from Harvard Business
School. He is fluent in Spanish and French.

James A. Yost,Vice
President, Finance and Chief Financial Officer, joined the
Company in 2002, after retiring from Ford Motor Company in 2001
where he most recently served as Vice President of Corporate
Strategy. He also held positions as Vice President and Chief
Information Officer, Executive Director of Corporate Finance,
General Auditor and Executive Director of Finance Process and
Systems Development, Finance Director of Ford Europe and
Controller of Autolatina (South America) during his 27-year
career. Mr. Yost graduated with a Bachelor of Engineering
Science degree in Computer Science from the Johns

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Hopkins University in Baltimore, Maryland. He
also received a Masters of Business Administration in
Finance from the University of Chicago.


Patrick C. Cauley,Vice President, General Counsel and Secretary, previously served
as Assistant General Counsel. Prior to joining the Company in
1999, Mr. Cauley served as a partner at the Detroit based
law firm of Bodman, Longley & Dahling LLP, where he
engaged in all aspects of corporate practice, including mergers
and acquisitions, commercial lending and financing, tax and real
estate transactions. Mr. Cauley earned his Bachelor of
Science degree in Business Administration, with a major in
Accounting and his Juris Doctor degree from the University of
Michigan. Mr. Cauley is also a Certified Public Accountant.

Brian J.
OLoughlin,Chief Information
Officer, joined the Company in 2002 from Revlon, Inc.,
where he served as Chief Information Officer. In this position,
Mr. OLoughlin was responsible for building
Revlons global Information Technology (IT)
function comprising 240 professionals across 18 countries. He
oversaw a major IT reorganization that introduced a centralized
infrastructure based on technical standards, reliable
architecture, and high levels of customer support. While serving
as Chief Information Officer at Revlon, Mr. OLoughlin
created a unified support structure for a diverse IT
environment. In earlier positions at Revlon,
Mr. OLoughlin worked as a Vice President of
Applications Development, Director of Systems &
Programming and a Project Manager. Prior to Revlon, he spent
four years in the industry as a consultant.
Mr. OLoughlin has also held information systems
management positions with Congoleum Corporation and
A.M. International. Mr. OLoughlin holds a
Bachelor of Science degree in Business Administration from
Ramapo College in New Jersey.

James L.
Stegemiller,Vice
President  President, North American Wheels, joined
the Company to lead the North American Wheels Business Unit that
was recently formed by consolidating the Companys North
American Fabricated and Cast Wheels Business Units into one
business. Prior to joining the Company, Mr. Stegemiller was
the Vice President of Worldwide Operations of Arvin Meritor with
responsibilities for all manufacturing operations within the
Exhaust Systems business. Mr. Stegemiller earned his
Bachelor of Science degree in Business Economics from The Purdue
University School of Industrial Management and has completed the
Executive Program at Indiana University. Mr. Stegemiller
has 27 years of experience in the automotive industry.

Scott T. Harrison,Vice President  President, Suspension Components,
joined the Company from Fisher Scientific, Inc. where he
was most recently a Vice President and General Manager of the
Lab Equipment Group. Prior to joining Fisher Scientific,
Mr. Harrison held various positions of increasing
responsibility at General Motors Delco Chassis Division,
at Arvin Industries and at Allied Signal. At Allied Signal,
Mr. Harrison directed the Six Sigma program in the Filters
and Spark Plugs Strategic Business Unit and was later
responsible for global spark plug (Autolite) manufacturing.
Mr. Harrison has a strong record of lean implementation,
productivity improvement and team building. He holds a Bachelor
of Science degree in Electrical Engineering from Ohio State
University and a Masters of Science degree in Electrical
Engineering from the University of Dayton, Ohio.
Mr. Harrison has 12 years of experience in the
automotive industry.

Daniel M. Sandberg,Vice President  President, Powertrain and Brakes, was
appointed President of Brakes in February 1999; and Powertrain
in October 2001. Mr. Sandberg joined the Company in April,
1994 as Vice President, General Counsel and Secretary. From 1996
to 1999, he served as Vice President of International
Operations, General Counsel and Secretary. At the time, in
addition to the Companys legal function, he was
responsible for developing a divestiture and  or
acquisition strategy for all of the Companys minority
owned joint ventures. He received his Bachelor of Arts degree in
Economics and his Juris Doctor degree from the University of
Michigan.

Fred Bentley,Vice
President  President, International Wheels, a Six
Sigma Black Belt, has a solid background of operations, lean
manufacturing and engineering. Prior to joining the Company, he
was Managing Director for Honeywells Holts European and
South Africa automotive after-market operations and served as
Plant Manager of Honeywell International. Prior to that,
Mr. Bentley was Heavy Duty Filter (FRAM) General
Manager for Honeywells operations in Greenville, Ohio and
Clearfield, Utah. Before joining Honeywell in 1995,
Mr. Bentley worked in various capacities at Frito
Lay, Inc. (PepsiCo) for a total of eight years.
Mr. Bentley earned his Bachelor of Science degree in
Industrial Engineering from the University

52



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of Cincinnati, Ohio, and a Masters of
Business Administration from the University of Phoenix.
Mr. Bentley has six years of experience in the automotive
industry.


Edward W. Kopkowski,Vice President  President, Commercial Highway and
Aftermarket Services, served immediately prior to joining the
Company as Founder and President of Kopko Associates, Ltd., a
consulting firm offering corporate clients guidance in the
deployment and use of world class operational improvement
methods. Prior to that time, he was Vice President of Modular
Products and Operating Excellence at Pilkington PLC
(formerly Libbey-Owens-Ford) in Toledo, Ohio. Additionally,
Mr. Kopkowski was Plant Manager at Bosch Braking Systems
machining and assembly plant in Ashland, Ohio. Before that, he
successfully served in a variety of management roles in
operations and engineering, at AlliedSignal Braking Systems and,
earlier in his career, Bendix Automotive Brake Systems, in both
South Bend, Indiana and St. Joseph, Michigan.
Mr. Kopkowski received his Bachelor of Science in
Mechanical Engineering from Purdue University, in Indiana, and
his Masters of Arts degree in Management from Nazareth
College in Kalamazoo, Michigan. He is also a licensed
Professional Engineer in the State of Michigan and an
ASQ Certified Quality Engineer.

John A. Salvette,Vice President  Business Development, is responsible
for the Metaalgieterij Giesen (MGG) and the Equipment and
Engineering Divisions and is in charge of directing the
Companys Corporate Strategy. After serving in various
financial positions with Rockwell Internationals
Automotive Operations in Winchester, Kentucky and serving as
Vice President and Chief Financial Officer of Stahl
Manufacturing, an automotive supplier in Redford, Michigan,
Mr. Salvette joined Kelsey-Hayes in 1990 as Controller for
the North American Aluminum Wheel Business Unit. From May 1993
to January 1995, Mr. Salvette served as Director of
Investor Relations and Business Planning and, from February 1995
to June 1997, as Corporate Treasurer to the Company. From July
1997 to January 1999, Mr. Salvette was Group Vice President
of Finance of Hayes Lemmerz Europe. Following the acquisition of
CMI International in February 1999, Mr. Salvette was
appointed Vice President of Finance, Cast Components Group.
Mr. Salvette received a Bachelor degree in Economics from
the University of Michigan in 1977 and a Masters of
Business Administration from the University of Chicago in 1979.

Michael J. Edie,Vice President  Materials and Logistics, came to his
position with over 25 years experience. Prior to joining
the Company, Mr. Edie served as a consultant for two years
in various capacities. His experience spans multiple
disciplines, including business process reengineering,
international and domestic logistics, and creating and managing
customized supply chain management solutions. Mr. Edie
started his career with Eastman Kodak Company, holding a number
of management positions including Vice President of U.S. and
Canada Distribution and Supply; and Regional Senior Vice
President of U.S. and Canada Marketing Services and Support. He
also spent six years at Revlon, Inc. and held a top post as
Senior Vice President of Distribution and Customer Logistics.
Mr. Edie holds a Bachelor of Arts degree from St. John
Fisher College in Rochester, New York and has completed
Executive Development Programs in Logistics and Transportation,
Human Resources and Management.

Larry Karenko,Vice
President  Human Resources and Administration, is
responsible for worldwide Public Relations, Communication and
Advertising, Philanthropy, Corporate Risk, Health, Safety and
Environmental, Corporate Travel, and Fleet Administration.
Mr. Karenko joined the Company in 1994 as Corporate Vice
President of Human Resources and became Vice President of Human
Resources and Administration after the acquisition of CMI, in
February 1999. Prior to joining the Company, Mr. Karenko
held the lead human resources position in the Powertrain
Products Group and the Chassis Products Group at Federal
Mogul, Inc., where he worked from 1979 to 1994. Before
that, Mr. Karenko served as an employment representative
and a wage and salary analyst at Newport News Shipbuilding and,
also, personnel manager for Kal-Equipment Corporation in Otsego,
Michigan, a manufacturer of automotive test equipment.
Mr. Karenko received a Bachelor of Science degree in Labor
and Industrial Relations from Michigan State University.

Audit Committee Financial Expert

The Board of Directors of the Company has
determined that Mr. Richard Wallman is an audit committee
financial expert as defined by Item 401(h) of
Regulation S-K of the Securities Exchange Act of

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##### Table of Contents



1934, as amended (the Exchange Act),
and is independent within the meaning of Item 7(d)(3)(iv)
of Schedule 14A of the Exchange Act.


Code of Ethics

The Company has adopted a code of business
conduct and ethics for directors, officers (including the
Companys principal executive officer and principal
financial officer) and employees (the Code of
Ethics). The Code of Ethics is available on the
Companys website, and pursuant to Exchange Act rules, a
copy of the Code of Ethics is filed as Exhibit 14 to this
Annual Report on Form 10-K. The Company intends to disclose
any changes in or waivers to the Code of Ethics applicable to
any officer or director on its website.

Section 16(a) Beneficial Ownership
Reporting Compliance

Information regarding Section 16(a)
beneficial ownership reporting compliance is set forth under
Common Stock Ownership of Certain Beneficial Owners and
Management  Section 16(a) Beneficial Ownership
Reporting Compliance in the Proxy Statement, which
information is incorporated herein by reference.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Information regarding the Companys
compensation of its named executive officers is set forth under
Executive Compensation in the Proxy Statement, which
information is incorporated herein by reference. Information
regarding the Companys compensation of its directors is
set forth under Director Compensation and Stock
Ownership in the Proxy Statement, which information is
incorporated herein by reference.






|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

Information regarding security ownership of
certain beneficial owners, directors and executive officers is
set forth under Common Stock Ownership of Certain
Beneficial Owners and Management in the Proxy Statement,
which information is incorporated herein by reference.

Information regarding the Companys equity
compensation plan is set forth under Executive
Compensation  Equity Compensation Plan
Information in the Proxy Statement, which information is
incorporated herein by reference.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

Information regarding certain relationships and
related transactions is set forth under Certain
Relationships and Related Transactions in the Proxy
Statement, which information is incorporated herein by reference.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

Information regarding principal auditor fees and
services is set forth under Principal Auditor Fees and
Services in the Proxy Statement, which information is
incorporated herein by reference.




PART IV





|         |                                     
|-------- | ------------------------------------
|Item 15. | Exhibits and Reports on
    Form 8-K

(a) The following documents are filed as
part of this report:



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | 1. Financial Statements for fiscal 2003,
    2002, and 2001                                        
|
| | The following financial statements of the
    registrant are filed herewith as part of this report:



| |                                 
| | --------------------------------
| | (1) Independent Auditors Report

54



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| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) Consolidated Statements of Operations
    for the eight months ended January 31, 2004, the four
    months ended May 31, 2003, and the years ended
    January 31, 2003 and 2002                                                          
|
| | (3) Consolidated Balance Sheets at
    January 31, 2004 and 2003                                                                                                                                                                              
|
| | (4) Consolidated Statements of Changes in
    Stockholders Equity (Deficit) and Comprehensive Loss for
    the eight months ended January 31, 2004, the four months
    ended May 31, 2003, and the years ended January 31,
    2003 and 2002
|
| | (5) Consolidated Statements of Cash Flows
    for the eight months ended January 31, 2004, the four
    months ended May 31, 2003, and the years ended
    January 31, 2003 and 2002                                                          
|
| | (6) Notes to Consolidated Financial
    Statements                                                                                                                                                                                            



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | 2. Financial Statement Schedules:                                                 
|
| | Schedule II  Valuation and
    Qualifying Accounts for fiscal 2003, 2002 and 2001

All other schedules are omitted as the
information required to be contained therein is disclosed
elsewhere in the financial statements or the amounts involved
are not sufficient to require submission or the schedule is
otherwise not required to be submitted.



| |            
| | -----------
| | 3. Exhibits

| |   |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | .1 |  | Modified First Amended Joint Plan of
    Reorganization of Hayes Lemmerz International, Inc. and Its
    Affiliated Debtors and Debtors in Possession, as Further
    Modified (incorporated by reference to Exhibit 2.1 to the
    Companys Current Report on Form 8-K, filed
    May 21, 2003).                                                                                                                                                   
| | 2 | .2 |  | Agreement and Plan of Merger, dated as of
    June 3, 2003, by and between Hayes Lemmerz
    International, Inc. and HLI Operating Company, Inc.
    (incorporated by reference to Exhibit 2.3 to the
    Companys Current Report on Form 8-K filed,
    June 3, 2003).                                                                                                                                                                             
| | 3 | .1 |  | Certificate of Incorporation of HLI Holding
    Company, Inc., effective as of May 6, 2003
    (incorporated by reference to Exhibit 3.1 to the
    Companys Form 8-A/A, filed June 4, 2003).                                                                                                                                                                                                                                                       
| | 3 | .2 |  | Amendment to the Certificate of Incorporation of
    HLI Holding Company, Inc., effective as of June 3,
    2003 (incorporated by reference to Exhibit 3.2 to the
    Companys Form 8-A/A, filed June 4, 2003).                                                                                                                                                                                                                                     
| | 3 | .3 |  | By-Laws of Hayes Lemmerz International, Inc.
    (formerly known as HLI Holding Company, Inc.), effective as
    of May 30, 2003 (incorporated by reference to
    Exhibit 3.3 to the Companys Form 8-A/A, filed
    June 4, 2003).                                                                                                                                                                                                                 
| | 4 | .1 |  | Purchase Agreement, dated as of May 22,
    2003, by and between Hayes Lemmerz International, Inc., its
    subsidiaries named therein, and the Initial Purchasers of the
    $250,000,000 of 10 1/2% Senior Notes due 2010 to be issued
    by HLI Operating Company, Inc. (incorporated by reference
    to Exhibit 4.1 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended April 30,
    2003, filed June 16, 2003).
| | 4 | .2 |  | Indenture, dated as of June 3, 2003,
    regarding $250,000,000 of 10 1/2% Senior Notes due
    2010, by and between HLI Operating Company, certain listed
    Guarantors, and U.S. Bank National Association, as Trustee
    (incorporated by reference to Exhibit 4.2 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended April 30, 2003, filed June 16,
    2003).                                              
| | 4 | .3 |  | Form of 10 1/2% Senior Notes due 2010
    (attached as Exhibit A to the Indenture filed as
    Exhibit 4.2 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended April 30,
    2003, filed June 16, 2003).                                                                                                                                                                                                               
| | 4 | .4 |  | First Supplemental Indenture, dated as of
    June 19, 2003, by and between HLI Operating
    Company, Inc. certain listed Guarantors, and U.S. Bank
    National Association, as Trustee (incorporated by reference to
    Exhibit 4.2 to the Companys Registration statement
    No. 333-107539 on Form S-4, filed on July 31,
    2003, as amended).                                                                                             
| | 4 | .5 |  | Registration Rights Agreement, dated as of
    June 3, 2003, by and between HLI Operating
    Company, Inc. and the Initial Purchasers of the
    10 1/2% Senior Notes due 2010 (incorporated by
    reference to Exhibit 4.3 to the Companys Quarterly
    Report on Form 10-Q for the quarterly period ended
    April 30, 2003, filed June 16, 2003).                                                                                            

55



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| |    |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4  | .6 |  | Series A Warrant Agreement, dated as of
    June 2, 2003, by and between Hayes Lemmerz
    International, Inc. and Mellon Investor Services LLC, as
    Warrant Agent (incorporated by reference to Exhibit 4.1 to
    the Companys Form 8-A, filed June 4, 2003).                                                                                                                                                                                                                                                                                                                 
| | 4  | .7 |  | Series B Warrant Agreement, dated as of
    June 2, 2003, by and between Hayes Lemmerz
    International, Inc. and Mellon Investor Services LLC, as
    Warrant Agent (incorporated by reference to Exhibit 4.2 to
    the Companys Form 8-A, filed June 4, 2003).                                                                                                                                                                                                                                                                                                                 
| | 4  | .8 |  | Exchange Agreement, dated as of June 3,
    2003, by and between Hayes Lemmerz International, Inc., HLI
    Parent Company, Inc. and HLI Operating Company, Inc.
    regarding the Series A Exchangeable Preferred Stock issued
    by HLI Operating Company, Inc. (incorporated by reference
    to Exhibit 4.3 to the Companys Quarterly Report on
    Form 10-Q for the quarterly period ended April 30, 2003,
    filed June 16, 2003).                                                                                                                                        
| | 10 | .1 |  | Form of Severance Agreement, dated June 15,
    2000, between the Company and certain of its officers
    (incorporated by reference from the Companys Quarterly
    Report on Form 10-Q for the quarter ended October 31, 2000,
    filed on December 15, 2000).                                                                                                                                                                                                                                                                                                                  
| | 10 | .2 |  | Amended and Restated Employment Agreement between
    the Company and Curtis J. Clawson, dated September 26, 2001
    (incorporated by reference from the Companys Quarterly
    Report on Form 10-Q for the quarter ended October 31, 2001,
    filed on April 18, 2002).                                                                                                                                                                                                                                                                                                         
| | 10 | .3 |  | Form of Employment Agreement between the Company
    and certain of its officers (incorporated by reference from the
    Companys Quarterly Report on Form 10-Q for the quarter
    ended October 31, 2001, filed on April 18, 2002).                                                                                                                                                                                                                                                                                                                                              
| | 10 | .4 |  | Hayes Lemmerz International, Inc. Long Term
    Incentive Plan (incorporated by reference to Exhibit 10.1
    to the Companys Registration Statement No. 333-110684
    on Form S-8, filed on November 21, 2003).                                                                                                                                                                                                                                                                                                                                                                  
| | 10 | .5 |  | Hayes Lemmerz International, Inc. Critical
    Employee Retention Plan (incorporated by reference to
    Exhibit 10.2 to the Companys Registration Statement
    No. 333-110684 on Form S-8, filed on November 21,
    2003).                                                                                                                                                                                                                                                                                                                                                      
| | 10 | .6 |  | Credit Agreement, dated as of June 3, 2003,
    by and among HLI Operating Company, Inc., as Borrower,
    Hayes Lemmerz International, Inc., the Lenders and Issuers
    listed therein, Citicorp North America, Inc., as
    Administrative Agent, Lehman Commercial Paper, Inc., as
    Syndication Agent, and General Electric Capital Corporation, as
    Documentation Agent (Incorporated by reference to
    Exhibit 99.3 to the Companys Quarterly Report on Form
    10-Q for the quarterly period ended April 30, 2003, filed
    June 16, 2003).                       
| | 10 | .7 |  | Amendment No. 1 and Waiver to Credit
    Agreement, dated as of October 16, 2003, by and among HLI
    Operating Company, Inc., as Borrower, Hayes Lemmerz
    International, Inc., the Lenders and Issuers listed
    therein, Citicorp North America, Inc., as Administrative
    Agent, Lehman Commercial Paper, Inc., as Syndication Agent,
    and General Electric Capital Corporation, as Documentation Agent
    (incorporated by reference to Exhibit 10.26 to the
    Companys Registration Statement No. 333-107539 on
    Form S-4, filed on July 31, 2003 as amended).
| | 10 | .8 |  | Amendment No. 2 and Waiver to Credit
    Agreement, dated as of February 6, 2004, by and among HLI
    Operating Company, Inc., as Borrower, Hayes Lemmerz
    International, Inc. the Lenders and Issuers listed therein,
    Citicorp North America, Inc., as Administrative Agent,
    Lehman Commercial Paper, Inc., as Syndication Agent, and
    General Electric Capital Corporation, as Documentation Agent*                                                                                                                                                                
| | 10 | .9 |  | Form of Directors Indemnification Agreement
    (incorporated by reference to Exhibit 10.49 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended July 31, 2003, filed
    September 15, 2003, as amended).                                                                                                                                                                                                                                                                                                                                         
| | 12 |    |  | Computation of Ratio of Earnings to Fixed
    Charges.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 14 |    |  | Code of Ethics.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 18 |    |  | Preferability Letter of KPMG LLP.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 21 |    |  | Subsidiaries of the Company.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 23 |    |  | Consent of KPMG LLP.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 24 |    |  | Powers of Attorney.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

56



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##### Table of Contents



| |    |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 31 | .1 |  | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                
| | 31 | .2 |  | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                            
| | 32 | .1 |  | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                             
| | 32 | .2 |  | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                         
| | 99 | .1 |  | Amended and Restated Certificate of Incorporation
    of HLI Operating Company, Inc., effective as of
    May 30, 2003 (incorporated by reference to Exhibit 4.3
    to the Companys Quarterly Report on Form 10-Q for the
    quarterly period ended April 30, 2003, filed June 16,
    2003).                                                                                                                                                                                                     
| | 99 | .2 |  | Guaranty, dated as of June 3, 2003, by and
    between HLI Operating Company, Hayes Lemmerz
    International, Inc., and the Guarantors named therein
    (incorporated by reference to Exhibit 4.3 to the
    Companys Quarterly Report on Form 10-Q for the quarterly
    period ended April 30, 2003, filed June 16, 2003).                                                                                                                                                                      
| | 99 | .3 |  | Pledge and Security Agreement, dated as of
    June 3, 2003, by and between Hayes Lemmerz
    International, Inc. and HLI Operating Company, as Grantors,
    the Additional Grantors named therein, Citicorp North
    America, Inc., as Administrative Agent, and Lehman
    Commercial Paper, Inc., as Syndication Agent (incorporated by
    reference to Exhibit 4.3 to the Companys Quarterly
    Report on Form 10-Q for the quarterly period ended
    April 30, 2003, filed June 16, 2003).



---



|  |                               
|- | ------------------------------
|* | Filed electronically herewith.

(b) Reports on Form 8-K

During the fiscal quarter ended January 31,
2004, the Company filed Current Reports on Form 8-K with
the SEC as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On December 2, 2003 reporting under items 5
    and 7, announcing that it has received approval from NASDAQ to
    begin trading December 2, 2003 on the NASDAQ National
    Market under the symbol HAYZ, and announcing the
    completion of the offer by its subsidiary, HLI Operating
    Company, Inc., to exchange up to $250,000,000 aggregate
    principal amount of its outstanding 10 1/2% Senior
    Notes due 2010 for a like principal amount of its
    10 1/2% Senior Notes due 2010.
|
| |  | On December 10, 2003 reporting under
    items 12, 7 and 9, disclosing the furnishing of highlighted
    financial data for the three months and nine months ended
    October 31, 2003.                                                                                                                                                                                                                                                                                                                
|
| |  | On January 16, 2004 reporting under
    items 5 and 7, announcing the purchase of certain assets
    from Hayes Wheels de Mexico, S.A. de C.V. and sale of its equity
    interest in Hayes Wheels de Mexico S.A. de C.V., to DESC, S.A.
    de C.V. (NYSE: DES).                                                                                                                                                                                                                                       
|
| |  | On January 23, 2004 reporting under
    item 9, furnishing certain projected financial data for the
    three months ended January 31, 2004 and the fiscal year
    ended January 31, 2005.                                                                                                                                                                                                                                                                                                             

57



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 8th day of
April, 2004.



| |                                  
| | ---------------------------------
| | HAYES LEMMERZ INTERNATIONAL, INC.



| |     |                  
| | --- | -----------------
| | By: | /s/ JAMES A. YOST

| |                             
| | ----------------------------
| |                             
| | James A. Yost               
| | Vice President, Finance, and
| | Chief Financial Officer     



| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuant to the requirements of the Securities
    Exchange Act of 1934, this report has been signed below by the
    following persons on behalf of the registrant in the capacities
    and on the dates indicated:

|                                                    |  |                                                                                             |  |               |  |              
|--------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | ------------- |  | -------------
|                                                    |  |                                                                                             |  |              
|Signature                                           |  | Title                                                                                       |  | Date         
|                                                    |  |                                                                                             |  |              
|                                                   
|/s/ CURTIS J. CLAWSONCurtis J. Clawson              |  | Chairman of the Board of Directors,
    Chief Executive Officer,
    President and Director |  | April 8, 2004
|                                                   
|/s/ JAMES A. YOSTJames A. Yost                      |  | Vice President, Finance, and
    Chief Financial Officer                                    |  | April 8, 2004
|                                                   
|/s/ MICHAEL J. POZSARMichael J. Pozsar              |  | Corporate Controller                                                                        |  | April 8, 2004
|                                                   
|/s/ LAURENCE BERG*Laurence Berg                     |  | Director                                                                                    |  | April 8, 2004
|                                                   
|/s/ WILLIAM C. CUNNINGHAM*William C. Cunningham     |  | Director                                                                                    |  | April 8, 2004
|                                                   
|/s/ GEORGE T. HAYMAKER, JR.*George T. Haymaker, Jr. |  | Lead Director                                                                               |  | April 8, 2004
|                                                   
|/s/ HENRY D. G. WALLACE*Henry D. G. Wallace         |  | Director                                                                                    |  | April 8, 2004
|                                                   
|/s/ RICHARD F. WALLMAN*Richard F. Wallman           |  | Director                                                                                    |  | April 8, 2004
|                                                   
|*                                                   |  | /s/ PATRICK C. CAULEYPatrick C. Cauley
    Attorney-in-fact                                 |  |               |  | April 8, 2004

58



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##### Table of Contents



HAYES LEMMERZ
INTERNATIONAL, INC.

INDEX TO FINANCIAL STATEMENTS

|                                                                                                      |  |      |     | 
|----------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                      |  | Page |    
|                                                                                                      |  |      |    
|Independent Auditors
    Report                                                                      |  |      | F-2 | 
|Consolidated Statements of
    Operations                                                             |  |      | F-3 | 
|Consolidated Balance
    Sheets                                                                       |  |      | F-4 | 
|Consolidated Statements of
    Changes in Stockholders Equity (Deficit) and Comprehensive
    (Loss) |  |      | F-5 | 
|Consolidated Statements of
    Cash Flows                                                             |  |      | F-6 | 
|Notes to Consolidated
    Financial Statements                                                        |  |      | F-7 | 

F-1



---



##### Table of Contents






INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders of Hayes
Lemmerz International, Inc.:

We have audited the accompanying consolidated
balance sheets of Hayes Lemmerz International, Inc. and
subsidiaries as of January 31, 2004 (the Successor) and
2003 (the Predecessor), and the related consolidated statements
of operations, changes in stockholders equity (deficit)
and comprehensive income (loss), and cash flows for the period
from June 1, 2003 to January 31, 2004 (the Successor),
the period from February 1, 2003 to May 31, 2003 and
each of the years in the two-year period ended January 31,
2003 (the Predecessor). In connection with the audits of the
consolidated financial statements, we also have audited the
related consolidated financial statement schedule listed in
Item 15, Schedule II. These consolidated financial
statements and the consolidated financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements and consolidated financial statement
schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Hayes Lemmerz International,
Inc. and subsidiaries as of January 31, 2004 (the
Successor) and 2003 (the Predecessor), and the results of their
operations and their cash flows for the period from June 1,
2003 to January 31, 2004 (the Successor), the period from
February 1, 2003 to May 31, 2003 and each of the years
in the two-year period ended January 31, 2003 (the
Predecessor), in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion,
the related consolidated financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

As discussed in Notes 1 and 2 to the
consolidated financial statements, the Successor emerged from
bankruptcy on June 3, 2003 pursuant to a Plan of
Reorganization confirmed by the Bankruptcy Court by order dated
May 12, 2003. Accordingly, the accompanying consolidated
financial statements of the Successor have been prepared in
conformity with the fresh start accounting provisions of the
AICPAs Statement of Position 90-7, Financial
Reporting by Entities in Reorganization Under the Bankruptcy
Code (SOP 90-7). As a result, the
consolidated financial statements of the Successor are presented
on a different basis than that prior to the reorganization and,
therefore, are not comparable in all respects.

As discussed in Notes 2 and 7, effective
February 1, 2002, the Predecessor adopted the provisions of
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets.



| |             
| | ------------
| | /s/ KPMG LLP

Detroit, Michigan

April 6, 2004


F-2



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES



CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |        |   |   |         |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ----- | ----------- | - | ------- | ----------- | - | - | ----------- | ------ | - | - | ------- | ------ | -
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |      
|                                                                                                                                                                                                                                                          |                                                                                                                                               | Successor                                       |         |       | Predecessor |  
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |  
|                                                                                                                                                                                                                                                          |                                                                                                                                               | Eight Months                                    |         |       | Four Months |   |         | Year        |   |   | Year        |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               | Ended                                           |         |       | Ended       |   |         | Ended       |   |   | Ended       |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               | January 31,                                     |         |       | May 31,     |   |         | January 31, |   |   | January 31, |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               | 2004                                            |         |       | 2003        |   |         | 2003        |   |   | 2002        |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                
|                                                                                                                                                                                                                                                          |                                                                                                                                               | (Millions of dollars, except per share amounts) |        
|Net sales                                                                                                                                                                                                                                                 |                                                                                                                                               | $                                               | 1,366.6 |       |             | $ | 689.8   |             |   | $ | 2,001.6     |        |   | $ | 2,039.1 |       
|Cost of goods sold                                                                                                                                                                                                                                        |                                                                                                                                               |                                                 | 1,225.8 |       |             |   | 611.3   |             |   |   | 1,793.9     |        |   |   | 1,907.4 |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          | Gross profit                                                                                                                                  |                                                 |         | 140.8 |             |   |         | 78.5        |   |   |             | 207.7  |   |   |         | 131.7  |  
|Marketing, general and administration                                                                                                                                                                                                                     |                                                                                                                                               |                                                 | 96.2    |       |             |   | 41.6    |             |   |   | 123.5       |        |   |   | 122.3   |       
|Amortization of intangible assets                                                                                                                                                                                                                         |                                                                                                                                               |                                                 | 8.5     |       |             |   | 1.6     |             |   |   | 3.3         |        |   |   | 26.4    |       
|Equity in losses of joint ventures                                                                                                                                                                                                                        |                                                                                                                                               |                                                 |        |       |             |   |        |             |   |   |            |        |   |   | 0.9     |       
|Asset impairments and other restructuring charges                                                                                                                                                                                                         |                                                                                                                                               |                                                 | 28.9    |       |             |   | 6.4     |             |   |   | 43.5        |        |   |   | 141.6   |       
|Loss on investment in joint venture                                                                                                                                                                                                                       |                                                                                                                                               |                                                 |        |       |             |   |        |             |   |   |            |        |   |   | 3.8     |       
|Other income, net                                                                                                                                                                                                                                         |                                                                                                                                               |                                                 | (4.3    | )     |             |   | (3.5    | )           |   |   | (6.8        | )      |   |   | (0.5    | )     
|Reorganization items                                                                                                                                                                                                                                      |                                                                                                                                               |                                                 |        |       |             |   | 45.0    |             |   |   | 44.5        |        |   |   | 47.8    |       
|Fresh start accounting adjustments                                                                                                                                                                                                                        |                                                                                                                                               |                                                 |        |       |             |   | (63.1   | )           |   |   |            |        |   |   |        |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          | Earnings (loss) from operations                                                                                                               |                                                 |         | 11.5  |             |   |         | 50.5        |   |   |             | (0.3   | ) |   |         | (210.6 | )
|Interest expense, net (excluding
    $38.7 million, $117.6 million and $18.7 million
    not accrued on liabilities subject to compromise during the four
    months ended May 31, 2003, and the years ended
    January 31, 2003 and 2002, respectively) |                                                                                                                                               |                                                 | 42.1    |       |             |   | 22.7    |             |   |   | 72.7        |        |   |   | 175.2   |       
|Other non-operating expense                                                                                                                                                                                                                               |                                                                                                                                               |                                                 | 1.1     |       |             |   |        |             |   |   |            |        |   |   |        |       
|Gain on early extinguishment of debt                                                                                                                                                                                                                      |                                                                                                                                               |                                                 |        |       |             |   |        |             |   |   |            |        |   |   | (4.2    | )     
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          | Earnings (loss) before taxes on income, minority
    interest, cumulative effect of change in accounting principle
    and extraordinary gain |                                                 |         | (31.7 | )           |   |         | 27.8        |   |   |             | (73.0  | ) |   |         | (381.6 | )
|Income tax expense                                                                                                                                                                                                                                        |                                                                                                                                               |                                                 | 10.9    |       |             |   | 60.3    |             |   |   | 3.6         |        |   |   | 11.8    |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          | Loss before minority interest, cumulative effect
    of change in accounting principle and extraordinary gain                                 |                                                 |         | (42.6 | )           |   |         | (32.5       | ) |   |             | (76.6  | ) |   |         | (393.4 | )
|Minority interest                                                                                                                                                                                                                                         |                                                                                                                                               |                                                 | 3.9     |       |             |   | 1.2     |             |   |   | 3.5         |        |   |   | 3.3     |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          | Loss before cumulative effect of change in
    accounting principle and extraordinary gain                                                    |                                                 |         | (46.5 | )           |   |         | (33.7       | ) |   |             | (80.1  | ) |   |         | (396.7 | )
|Cumulative effect of change in accounting
    principle, net of tax of $0                                                                                                                                                                                 |                                                                                                                                               |                                                 |        |       |             |   |        |             |   |   | (554.4      | )      |   |   |        |       
|Extraordinary gain on debt discharge, net of tax
    of $0                                                                                                                                                                                                |                                                                                                                                               |                                                 |        |       |             |   | 1,076.7 |             |   |   |            |        |   |   |        |       
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|                                                                                                                                                                                                                                                          | Net income (loss)                                                                                                                             |                                                 | $       | (46.5 | )           |   | $       | 1,043.0     |   |   | $           | (634.5 | ) |   | $       | (396.7 | )
|                                                                                                                                                                                                                                                          |                                                                                                                                               |                                                 |         |       |             |   |         |             |   |   |             |       
|Basic and diluted net loss per share                                                                                                                                                                                                                      |                                                                                                                                               | $                                               | (1.55   | )     |             |   |         |             |   |   |             |        |   |   |         |       

See accompanying notes to consolidated financial
statements.

F-3



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS


|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |         |         |          |     |          |  
|-------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------- | ----- | ----------- | ------- | ------- | -------- | --- | -------- | -
|                                                   |                                                                                                                   | Successor                                                                                                                                  |                                                          |       | Predecessor |        
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   | January 31,                                                                                                                                |                                                          |       | January 31, |        
|                                                   |                                                                                                                   | 2004                                                                                                                                       |                                                          |       | 2003        |        
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   |                                                                                                                                           
|                                                   |                                                                                                                   | (Millions of dollars,                                                                                                                      |                                                         
|                                                   |                                                                                                                   | except share amounts)                                                                                                                      |                                                         
|ASSETS                                            
|Current assets:                                    |                                                                                                                   |                                                                                                                                            |                                                          |       |             |         |         |         
|                                                   | Cash and cash equivalents                                                                                         |                                                                                                                                            | $                                                        | 48.5  |             |         | $       | 66.1     |    
|                                                   | Receivables, net of allowance of
    $6.6 million at January 31, 2004 and $7.2 million
    at January 31, 2003    |                                                                                                                                            |                                                          | 324.4 |             |         |         | 276.6    |    
|                                                   | Inventories                                                                                                       |                                                                                                                                            |                                                          | 189.3 |             |         |         | 176.6    |    
|                                                   | Deferred tax assets                                                                                               |                                                                                                                                            |                                                          | 2.7   |             |         |         | 7.2      |    
|                                                   | Prepaid expenses and other                                                                                        |                                                                                                                                            |                                                          | 13.9  |             |         |         | 18.4     |    
|                                                   | Assets held for sale                                                                                              |                                                                                                                                            |                                                          | 12.4  |             |         |         | 6.9      |    
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   |                                                                                                                                            | Total current assets                                     |       |             | 591.2   |         |          |     | 551.8    |  
|Property, plant and equipment, net                 |                                                                                                                   |                                                                                                                                            | 966.5                                                    |       |             |         | 951.2   |         
|Deferred tax assets                                |                                                                                                                   |                                                                                                                                            | 7.9                                                      |       |             |         | 7.7     |         
|Goodwill                                           |                                                                                                                   |                                                                                                                                            | 416.2                                                    |       |             |         | 191.3   |         
|Intangible assets, net                             |                                                                                                                   |                                                                                                                                            | 237.2                                                    |       |             |         | 102.6   |         
|Other assets                                       |                                                                                                                   |                                                                                                                                            | 77.6                                                     |       |             |         | 42.0    |         
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   |                                                                                                                                            | Total assets                                             |       | $           | 2,296.6 |         |          | $   | 1,846.6  |  
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                  
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)
|Current liabilities:                               |                                                                                                                   |                                                                                                                                            |                                                          |       |             |         |         |         
|                                                   | DIP facility                                                                                                      |                                                                                                                                            | $                                                        |      |             |         | $       | 49.9     |    
|                                                   | Bank borrowings and other notes                                                                                   |                                                                                                                                            |                                                          | 14.2  |             |         |         | 15.8     |    
|                                                   | Current portion of long-term debt                                                                                 |                                                                                                                                            |                                                          | 11.3  |             |         |         | 40.1     |    
|                                                   | Accounts payable and accrued liabilities                                                                          |                                                                                                                                            |                                                          | 354.4 |             |         |         | 268.7    |    
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   |                                                                                                                                            | Total current liabilities                                |       |             | 379.9   |         |          |     | 374.5    |  
|Long-term debt, net of current portion             |                                                                                                                   |                                                                                                                                            | 752.4                                                    |       |             |         | 61.9    |         
|Deferred tax liabilities                           |                                                                                                                   |                                                                                                                                            | 98.5                                                     |       |             |         | 53.2    |         
|Pension and other long-term liabilities            |                                                                                                                   |                                                                                                                                            | 428.0                                                    |       |             |         | 281.2   |         
|Series A Warrants and Series B Warrants            |                                                                                                                   |                                                                                                                                            | 8.2                                                      |       |             |         |        |         
|Redeemable preferred stock of subsidiary           |                                                                                                                   |                                                                                                                                            | 10.5                                                     |       |             |         |        |         
|Minority interest                                  |                                                                                                                   |                                                                                                                                            | 23.2                                                     |       |             |         | 16.4    |         
|Liabilities subject to compromise                  |                                                                                                                   |                                                                                                                                            |                                                         |       |             |         | 2,133.8 |         
|Commitments and contingencies                      |                                                                                                                   |                                                                                                                                            |                                                          |       |             |         |         |         
|Stockholders equity (deficit):                    |                                                                                                                   |                                                                                                                                            |                                                          |       |             |         |         |         
|                                                   | Successor preferred stock, 1,000,000 shares
    authorized, none issued or outstanding at January 31, 2004        |                                                                                                                                            |                                                          |      |             |         |         |         |    
|                                                   | Predecessor preferred stock,
    25,000,000 shares authorized, none issued or outstanding at
    January 31, 2003 |                                                                                                                                            |                                                          |      |             |         |         |         |    
|                                                   | Common stock, par value $0.01 per share:                                                                          |                                                                                                                                            |                                                          |       |             |         |         |          |    
|                                                   |                                                                                                                   | Successor voting 
    100,000,000 shares authorized; 30,000,000 issued and
    outstanding at January 31, 2004                            |                                                          |       | 0.3         |         |         |          |    |         
|                                                   |                                                                                                                   | Predecessor voting 
    99,000,000 shares authorized; 27,708,419 shares
    issued; 25,806,969 shares outstanding at January 31,
    2003 |                                                          |       |            |         |         |          | 0.3 |         
|                                                   |                                                                                                                   | Predecessor nonvoting 
    5,000,000 shares authorized; 2,649,026 shares issued
    and outstanding at January 31, 2003                   |                                                          |       |            |         |         |          |    |         
|                                                   | Additional paid in capital                                                                                        |                                                                                                                                            |                                                          | 548.2 |             |         |         | 235.1    |    
|                                                   | Predecessor common stock in treasury at cost,
    1,901,450 shares at January 31, 2003                            |                                                                                                                                            |                                                          |      |             |         |         | (25.7    | )  
|                                                   | Accumulated deficit                                                                                               |                                                                                                                                            |                                                          | (46.5 | )           |         |         | (1,176.9 | )  
|                                                   | Accumulated other comprehensive income (loss)                                                                     |                                                                                                                                            |                                                          | 93.9  |             |         |         | (107.2   | )  
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   |                                                                                                                                            | Total stockholders equity (deficit)                     |       |             | 595.9   |         |          |     | (1,074.4 | )
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        
|                                                   |                                                                                                                   |                                                                                                                                            | Total liabilities and stockholders equity
    (deficit) |       | $           | 2,296.6 |         |          | $   | 1,846.6  |  
|                                                   |                                                                                                                   |                                                                                                                                            |                                                          |       |             |        

See accompanying notes to consolidated financial
statements.

F-4



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS


EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
(LOSS)


|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |         |         |  
|--------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------------- | ----------- | - | ---------- | - | ---- | -------- |  | -------- | ------------ | - | ----- | ------------- | ----- | - | ------------- | - | -------- | ------- | - | - | ------ | ----- | - | - | -------- | ------- | ------- | -
|                                                                            |                                      |                                             |             |   |            |   |      | Retained |  |          | Accumulated  |   |       |              
|                                                                            |                                      | Common Stock                                |             |   | Additional |   |      |          |  | Earnings |              |   | Other |               |       |  
|                                                                            |                                      |                                             |             |   | Paid-in    |   |      | Treasury |  |          | (Accumulated |   |       | Comprehensive |       |   |              
|                                                                            |                                      | Shares                                      |             |   | Par Value  |   |      | Capital  |  |          | Stock        |   |       | Deficit)      |       |   | Income (Loss) |   |          | Total   |  
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|                                                                            |                                      |                                            
|                                                                            |                                      | (Millions of dollars, except share amounts) |            
|Predecessor                                                                 |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |        
|Balance at January 31, 2001                                                 |                                      |                                             | 28,455,495  |   |            | $ | 0.3  |          |  | $        | 235.1        |   |       | $             | (25.7 | ) |               | $ | (145.7   | )       |   | $ | (85.8  | )     |   | $ | (21.8    | )      
|Comprehensive loss:                                                         |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |        
|                                                                            | Net loss                             |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          | (396.7  | ) |   |        |      |   |   |          | (396.7  | )      
|                                                                            | Currency translation adjustment      |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          |        |   |   |        | (6.1  | ) |   |          | (6.1    | )      
|                                                                            | Minimum pension liability adjustment |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          |        |   |   |        | (35.4 | ) |   |          | (35.4   | )      
|                                                                            |                                      | Total comprehensive loss                    |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |         | (438.2  | )
|Issuance of common stock                                                    |                                      |                                             | 500         |   |            |   |     |          |  |          |             |   |       |               |      |   |               |   |         |         |   |   |       |       |   |   |         |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|Balance at January 31, 2002                                                 |                                      |                                             | 28,455,995  |   |            |   | 0.3  |          |  |          | 235.1        |   |       |               | (25.7 | ) |               |   | (542.4   | )       |   |   | (127.3 | )     |   |   | (460.0   | )      
|Comprehensive loss:                                                         |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |        
|                                                                            | Net loss                             |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          | (634.5  | ) |   |        |      |   |   |          | (634.5  | )      
|                                                                            | Currency translation adjustment      |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          |        |   |   |        | 47.5  |   |   |          | 47.5    |        
|                                                                            | Minimum pension liability adjustment |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          |        |   |   |        | (27.4 | ) |   |          | (27.4   | )      
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|                                                                            |                                      | Total comprehensive loss                    |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |         | (614.4  | )
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|Balance at January 31, 2003                                                 |                                      |                                             | 28,455,995  |   |            | $ | 0.3  |          |  | $        | 235.1        |   |       | $             | (25.7 | ) |               | $ | (1,176.9 | )       |   | $ | (107.2 | )     |   | $ | (1,074.4 | )      
|Comprehensive income:                                                       |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |        
|                                                                            | Net income                           |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          | 1,043.0 |   |   |        |      |   |   |          | 1,043.0 |        
|                                                                            | Currency translation adjustment      |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          |        |   |   |        | 31.4  |   |   |          | 31.4    |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|                                                                            |                                      | Total comprehensive income                  |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |         | 1,074.4 |  
|Elimination of Predecessor equity accounts under
    fresh start accounting |                                      |                                             | (28,455,995 | ) |            |   | (0.3 | )        |  |          | (235.1       | ) |       |               | 25.7  |   |               |   | 133.9    |         |   |   | 75.8   |       |   |   |         |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|Balance at May 31, 2003                                                     |                                      |                                             |            |   |            | $ |     |          |  | $        |             |   |       | $             |      |   |               | $ |         |         |   | $ |       |       |   | $ |         |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|Successor                                                                   |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |        
|Balance at May 31, 2003                                                     |                                      |                                             |            |   |            | $ |     |          |  | $        |             |   |       | $             |      |   |               | $ |         |         |   | $ |       |       |   | $ |         |        
|Distribution of new common stock upon emergence                             |                                      |                                             | 30,000,000  |   |            |   | 0.3  |          |  |          | 544.1        |   |       |               |      |   |               |   |         |         |   |   |       |       |   |   | 544.4    |        
|Comprehensive income:                                                       |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |        
|                                                                            | Net loss                             |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          | (46.5   | ) |   |        |      |   |   |          | (46.5   | )      
|                                                                            | Currency translation adjustment      |                                             |             |  |            |   |      |         |  |          |              |  |       |               |       |  |               |   |          |        |   |   |        | 93.9  |   |   |          | 93.9    |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|                                                                            |                                      | Total comprehensive income                  |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |   |   |        |       |   |   |          |         | 47.4    |  
|Vesting of restricted stock units                                           |                                      |                                             |            |   |            |   |     |          |  |          | 4.1          |   |       |               |      |   |               |   |         |         |   |   |       |       |   |   | 4.1      |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  
|Balance at January 31, 2004                                                 |                                      |                                             | 30,000,000  |   |            | $ | 0.3  |          |  | $        | 548.2        |   |       | $             |      |   |               | $ | (46.5    | )       |   | $ | 93.9   |       |   | $ | 595.9    |        
|                                                                            |                                      |                                             |             |   |            |   |      |          |  |          |              |   |       |               |       |   |               |   |          |         |  

See accompanying notes to consolidated financial
statements.

F-5



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |        |        |       |      |        |        |       |  
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------ | ----------- | ----- | ----- | ----------- | ----- | -------- | ----------- | ------ | ------ | ----- | ---- | ------ | ------ | ----- | -
|                                                                 |                                                                                    |                                                                                                     |                                          |       
|                                                                 |                                                                                    | Successor                                                                                           |                                          |        | Predecessor |      
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |      
|                                                                 |                                                                                    | Eight                                                                                               |                                          |        | Four        |       |       |            
|                                                                 |                                                                                    | Months                                                                                              |                                          |        | Months      |       |       | Year        |       |          | Year        |       
|                                                                 |                                                                                    | Ended                                                                                               |                                          |        | Ended       |       |       | Ended       |       |          | Ended       |       
|                                                                 |                                                                                    | January 31,                                                                                         |                                          |        | May 31,     |       |       | January 31, |       |          | January 31, |       
|                                                                 |                                                                                    | 2004                                                                                                |                                          |        | 2003        |       |       | 2003        |       |          | 2002        |       
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|                                                                 |                                                                                    |                                                                                                    
|                                                                 |                                                                                    | (Millions of dollars)                                                                               |                                         
|Cash flows from operating activities:                            |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |        |        |       |      |       
|                                                                 | Net income (loss)                                                                  |                                                                                                     | $                                        | (46.5  | )           |       | $     | 1,043.0     |       |          | $           | (634.5 | )      |       | $    | (396.7 | )     
|                                                                 | Adjustments to reconcile net income (loss) to net
    cash provided by operations: |                                                                                                     |                                          |        |             |       |       |             |       |          |             |        |        |       |      |        |       
|                                                                 |                                                                                    | Depreciation and tooling amortization                                                               |                                          |        | 102.6       |       |       |             | 44.8  |          |             |        | 128.7  |       |      |        | 130.0  |      
|                                                                 |                                                                                    | Amortization of intangibles                                                                         |                                          |        | 8.5         |       |       |             | 1.6   |          |             |        | 3.3    |       |      |        | 26.4   |      
|                                                                 |                                                                                    | Amortization of deferred financing fees and
    accretion of discount                               |                                          |        | 2.4         |       |       |             | 1.6   |          |             |        | 5.9    |       |      |        | 7.4    |      
|                                                                 |                                                                                    | Interest income resulting from fair value
    adjustment of Series A Warrants and Series B Warrants |                                          |        | (1.1        | )     |       |             |      |          |             |        |       |       |      |        |       |      
|                                                                 |                                                                                    | Change in deferred income taxes                                                                     |                                          |        | (4.9        | )     |       |             | 52.6  |          |             |        | 14.4   |       |      |        | (1.4   | )    
|                                                                 |                                                                                    | Asset impairments and other restructuring charges                                                   |                                          |        | 28.9        |       |       |             | 6.4   |          |             |        | 43.5   |       |      |        | 141.6  |      
|                                                                 |                                                                                    | Loss on investment in joint venture                                                                 |                                          |        |            |       |       |             |      |          |             |        |       |       |      |        | 3.8    |      
|                                                                 |                                                                                    | Minority interest                                                                                   |                                          |        | 3.9         |       |       |             | 1.2   |          |             |        | 3.5    |       |      |        | 3.3    |      
|                                                                 |                                                                                    | Equity in losses of joint ventures                                                                  |                                          |        |            |       |       |             |      |          |             |        |       |       |      |        | 0.9    |      
|                                                                 |                                                                                    | Subsidiary preferred stock dividends accrued                                                        |                                          |        | 0.5         |       |       |             |      |          |             |        |       |       |      |        |       |      
|                                                                 |                                                                                    | Compensation expense related to vested restricted
    stock units                                   |                                          |        | 4.1         |       |       |             |      |          |             |        |       |       |      |        |       |      
|                                                                 |                                                                                    | Cumulative effect of change in accounting
    principle                                             |                                          |        |            |       |       |             |      |          |             |        | 554.4  |       |      |        |       |      
|                                                                 |                                                                                    | Gain on early extinguishment of debt, net of tax                                                    |                                          |        |            |       |       |             |      |          |             |        |       |       |      |        | (2.7   | )    
|                                                                 |                                                                                    | Loss (gain) on disposal of assets and
    businesses                                                |                                          |        | (0.4        | )     |       |             | (0.4  | )        |             |        | (0.5   | )     |      |        | 7.2    |      
|                                                                 |                                                                                    | Changes in operating assets and liabilities that
    increase (decrease) cash flows:                |                                          |        |             |       |       |             |       |          |             |        |        |       |      |        |        |      
|                                                                 |                                                                                    |                                                                                                     | Receivables                              |        |             | 6.1   |       |             |       | (13.7    | )           |        |        | (1.0  | )    |        |        | 41.7  |  
|                                                                 |                                                                                    |                                                                                                     | Inventories                              |        |             | 16.0  |       |             |       | (4.0     | )           |        |        | (16.5 | )    |        |        | 56.7  |  
|                                                                 |                                                                                    |                                                                                                     | Prepaid expenses and other               |        |             | 0.9   |       |             |       | 5.2      |             |        |        | 2.4   |      |        |        | (3.6  | )
|                                                                 |                                                                                    |                                                                                                     | Accounts payable and accrued liabilities |        |             | 8.1   |       |             |       | (6.9     | )           |        |        | (15.3 | )    |        |        | (77.8 | )
|                                                                 |                                                                                    | Chapter 11 items:                                                                                   |                                          |        |             |       |       |             |       |          |             |        |        |       |      |        |        |      
|                                                                 |                                                                                    |                                                                                                     | Reorganization items                     |        |             |      |       |             |       | 45.0     |             |        |        | 44.5  |      |        |        | 47.8  |  
|                                                                 |                                                                                    |                                                                                                     | Fresh start accounting adjustments       |        |             |      |       |             |       | (63.1    | )           |        |        |      |      |        |        |      |  
|                                                                 |                                                                                    |                                                                                                     | Extraordinary gain on debt discharge     |        |             |      |       |             |       | (1,076.7 | )           |        |        |      |      |        |        |      |  
|                                                                 |                                                                                    |                                                                                                     | Interest accrued on Credit Agreement     |        |             |      |       |             |       | 16.9     |             |        |        | 54.6  |      |        |        | 8.7   |  
|                                                                 |                                                                                    |                                                                                                     | Payments related to Chapter 11 Filings   |        |             | (45.2 | )     |             |       | (22.4    | )           |        |        | (81.7 | )    |        |        | (5.3  | )
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|                                                                 |                                                                                    | Cash provided by (used for) operating activities                                                    |                                          |        | 83.9        |       |       |             | 31.1  |          |             |        | 105.7  |       |      |        | (12.0  | )    
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|Cash flows from investing activities:                            |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |        |        |       |      |       
|                                                                 | Purchase of property, plant, equipment and tooling                                 |                                                                                                     |                                          | (106.7 | )           |       |       | (26.3       | )     |          |             | (106.8 | )      |       |      | (147.0 | )     
|                                                                 | Purchase of equipment previously leased                                            |                                                                                                     |                                          |       |             |       |       | (23.6       | )     |          |             |       |        |       |      |       |       
|                                                                 | Purchase of businesses, net of cash acquired                                       |                                                                                                     |                                          | (19.8  | )           |       |       |            |       |          |             | (7.2   | )      |       |      |       |       
|                                                                 | Net proceeds from termination of cross-currency
    swap agreements                |                                                                                                     |                                          |       |             |       |       |            |       |          |             |       |        |       |      | 10.1   |       
|                                                                 | Proceeds from disposal of assets and businesses                                    |                                                                                                     |                                          | 4.7    |             |       |       | 0.8         |       |          |             | 9.6    |        |       |      | 20.5   |       
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|                                                                 |                                                                                    | Cash used for investing activities                                                                  |                                          |        | (121.8      | )     |       |             | (49.1 | )        |             |        | (104.4 | )     |      |        | (116.4 | )    
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|Cash flows from financing activities:                            |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |        |        |       |      |       
|                                                                 | Changes in bank borrowings and credit facilities                                   |                                                                                                     |                                          | (16.0  | )           |       |       | (59.7       | )     |          |             | 14.5   |        |       |      | 239.5  |       
|                                                                 | Proceeds from New Senior Notes, net of discount
    and related fees               |                                                                                                     |                                          |       |             |       |       | 242.8       |       |          |             |       |        |       |      |       |       
|                                                                 | Proceeds from New Term Loan, net of related fees                                   |                                                                                                     |                                          |       |             |       |       | 436.1       |       |          |             |       |        |       |      |       |       
|                                                                 | Prepetition Lenders Payment amount                                                |                                                                                                     |                                          |       |             |       |       | (477.3      | )     |          |             |       |        |       |      |       |       
|                                                                 | Payment to holders of Old Senior Notes                                             |                                                                                                     |                                          |       |             |       |       | (13.0       | )     |          |             |       |        |       |      |       |       
|                                                                 | Repayment of long-term debt                                                        |                                                                                                     |                                          | (83.9  | )           |       |       |            |       |          |             |       |        |       |      | (417.9 | )     
|                                                                 | Repayment of note payable                                                          |                                                                                                     |                                          |       |             |       |       | (2.0        | )     |          |             |       |        |       |      |       |       
|                                                                 | Net proceeds from payments on accounts receivable
    securitization               |                                                                                                     |                                          |       |             |       |       |            |       |          |             |       |        |       |      | (71.6  | )     
|                                                                 | Proceeds from refinancing, net of related fees                                     |                                                                                                     |                                          |       |             |       |       |            |       |          |             |       |        |       |      | 435.4  |       
|                                                                 | Credit facility fees                                                               |                                                                                                     |                                          |       |             |       |       |            |       |          |             |       |        |       |      | (10.6  | )     
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|                                                                 |                                                                                    | Cash provided by (used for) financing activities                                                    |                                          |        | (99.9       | )     |       |             | 126.9 |          |             |        | 14.5   |       |      |        | 174.8  |      
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|Effect of exchange rate changes on cash and cash
    equivalents |                                                                                    |                                                                                                     | 7.2                                      |        |             |       | 4.1   |             |       |          | 5.1         |        |        |       | (1.2 | )     
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|                                                                 | Increase (decrease) in cash and cash equivalents                                   |                                                                                                     |                                          | (130.6 | )           |       |       | 113.0       |       |          |             | 20.9   |        |       |      | 45.2   |       
|Cash and cash equivalents at beginning of period                 |                                                                                    |                                                                                                     | 179.1                                    |        |             |       | 66.1  |             |       |          | 45.2        |        |        |       |     |       
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       
|Cash and cash equivalents at end of period                       |                                                                                    | $                                                                                                   | 48.5                                     |        |             | $     | 179.1 |             |       | $        | 66.1        |        |        | $     | 45.2 |       
|                                                                 |                                                                                    |                                                                                                     |                                          |        |             |       |       |             |       |          |             |       

See accompanying notes to consolidated financial
statements.

F-6



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


Eight Months Ended January 31, 2004, Four
Months Ended May 31, 2003 and


Years ended January 31, 2003 and
2002




|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(1) | Description of Business, Chapter 11
    Filings and Emergence from Chapter 11



| |                        
| | -----------------------
| | Description of Business

Unless otherwise indicated, references to
Company mean Hayes Lemmerz International, Inc.
and its subsidiaries, and references to fiscal year means the
Companys year commencing on February 1 of that year and
ending on January 31 of the following year (i.e.,
fiscal 2003 refers to the period beginning
February 1, 2003 and ending January 31, 2004,
fiscal 2002 refers to the period beginning
February 1, 2002 and ending January 31, 2003 and
fiscal 2001 refers to the period beginning
February 1, 2001 and ending January 31, 2002).

The Company is a leading supplier of wheels,
wheel-end attachments, aluminum structural components and
automotive brake components. The Company is the worlds
largest manufacturer of automotive wheels. In addition, the
Company also designs and manufactures wheels and brake
components for commercial highway vehicles, and powertrain
components and aluminum non-structural components for the
automotive, commercial highway, heating and general equipment
industries. Approximately 50% of the Companys fiscal 2003
total sales consisted of sales to Ford, DaimlerChrysler and
General Motors and their subsidiaries on a worldwide basis.

Originally founded in 1908, the Company is a
leading worldwide producer of aluminum and steel wheels for the
light vehicle market. The Company is a leading provider of steel
wheels for the commercial highway market. The Company is also a
leading supplier in the high growth market for lightweight
aluminum products, including suspension, brake and powertrain
components. The Company has a global footprint with
44 facilities located in 14 countries around the
world. The Company sells products to every major North American,
Japanese and European manufacturer of passenger cars and light
trucks as well as more than 300 commercial highway vehicle
customers throughout the world.



| |                   
| | ------------------
| | Chapter 11 Filings

On December 5, 2001, Hayes Lemmerz
International, Inc., 30 of its wholly-owned domestic
subsidiaries and one wholly-owned Mexican subsidiary
(collectively, the Debtors) filed voluntary
petitions for reorganization relief (the Chapter 11
Filings or the Filings) under Chapter 11
of the Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware (the Bankruptcy Court).

On December 16, 2002, certain of the Debtors
filed a proposed joint plan of reorganization with the
Bankruptcy Court. On April 9, 2003, the Debtors filed a
modified first amended joint plan of reorganization (the
Plan of Reorganization) which received the requisite
support from creditors authorized to vote thereon. The following
five Debtors were not proponents of the Plan of Reorganization
and are not subject to the terms thereof: HLI Netherlands
Holdings, Inc., CMI Quaker Alloy, Inc., Hayes Lemmerz
Funding Company, LLC, Hayes Lemmerz Funding Corporation, and
Hayes Lemmerz International Import, Inc. (collectively, the
Non-reorganizing Debtors).

The Plan of Reorganization provided for the
cancellation of the existing common stock of the Company and the
issuance of cash, new common stock in the reorganized Company
and other property to certain creditors of the Company in
respect of certain classes of claims. The Plan of Reorganization
was confirmed by an order of the Bankruptcy Court on
May 12, 2003, which order has become final and
non-appealable.



| |                              
| | -----------------------------
| | Emergence from
    Chapter 11

On June 3, 2003 (the Effective
Date), Hayes Lemmerz International, Inc. and each of
the 27 Debtors proposing the Plan of Reorganization emerged from
Chapter 11 proceedings pursuant to the Plan of

F-7



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Reorganization, which was confirmed by an order
of the Bankruptcy Court on May 12, 2003, which order has
become final and non-appealable. The Non-reorganizing Debtors
were not proponents of the Plan of Reorganization and are not
subject to the terms thereof. On June 3, 2003, the
Bankruptcy Court entered an order dismissing the Chapter 11
Filings of the Non-reorganizing Debtors.

Pursuant to the Plan of Reorganization, the
Company caused the formation of (i) a new holding company,
HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a
Delaware corporation and a wholly owned subsidiary of HoldCo
(ParentCo), and (iii) HLI Operating
Company, Inc, a Delaware corporation and a wholly owned
subsidiary of ParentCo (HLI). On the Effective Date,
(i) HoldCo was renamed Hayes Lemmerz
International, Inc. (New Hayes), (ii) New
Hayes contributed to ParentCo 30,0000,000 shares of its
common stock, par value $.01 per share (the New
Common Stock), and 957,447 series A warrants and 957,447
series B warrants to acquire New Common Stock of New Hayes (the
Series A Warrants and Series B
Warrants, respectively), (iii) ParentCo in turn
contributed such shares of New Common Stock and Series A
Warrants and Series B Warrants to HLI and
(iv) pursuant to an Agreement and Plan of Merger, dated as
of June 3, 2003 (the Merger Agreement), between
the Company and HLI, the Company was merged with and into HLI
(the Merger), with HLI continuing as the surviving
corporation.

Pursuant to the Plan of Reorganization and as a
result of the Merger, all of the issued and outstanding shares
of common stock, par value $.01 per share, of the Company
(the Old Common Stock), and any other outstanding
equity securities of the Company, including all options and
warrants, were cancelled. The holders of the existing voting
common stock of the Company immediately before confirmation did
not receive any voting shares of the emerging entity or any
other consideration under the Plan of Reorganization as a result
of their ownership interests of the Predecessor. This
represented a complete change of control in the ownership of the
Company. Promptly following the Merger, HLI distributed to
certain holders of allowed claims, under the terms of the Plan
of Reorganization, an amount in cash, the New Common Stock, the
Series A Warrants, the Series B Warrants and the
Preferred Stock (as defined below). Prior to the Merger, the Old
Common Stock was registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act). In reliance on Rule 12g-3(a) of
the Exchange Act, by virtue of the status of New Hayes as a
successor issuer to the Company, the New Common Stock is deemed
registered under Section 12(g) of the Exchange Act. The
Company filed a Form 15 with the SEC to terminate the
registration of the Old Common Stock under the Exchange Act.

Pursuant to the terms of the Plan of
Reorganization, HLI issued 100,000 shares of Preferred
Stock, par value $1.00, of HLI (the Preferred Stock)
to the holders of certain allowed claims. In accordance with the
terms of the Preferred Stock, the shares of Preferred Stock are,
at the holders option, exchangeable into a number of fully
paid and nonassessable shares of New Common Stock equal to
(i) the aggregate liquidation preference of the shares of
Preferred Stock so exchanged ($100 per share plus all
accrued and unpaid dividends thereon (whether or not declared)
to the exchange date) divided by (ii) 125% of the
Emergence Share Price. As determined pursuant to the
terms of the Plan of Reorganization, the Emergence Share Price
is $18.50.

In connection with the Debtors emergence
from Chapter 11, on the Effective Date, HLI entered into a
$550.0 million senior secured credit facility, as amended
by Amendment No. 1 and Waiver to Credit Agreement, dated
October 16, 2003 (as amended, the New Credit
Facility). The New Credit Facility consists of a
$450.0 million six-year amortizing term loan (the New
Term Loan) and a five-year $100.0 million revolving
credit facility (the Revolving Credit Facility). In
addition, HLI issued on the Effective Date an aggregate of
$250.0 million principal amount of 10 1/2% senior
notes due 2010 (the New Senior Notes). The proceeds
from the initial $450.0 million of borrowings under the New
Credit Facility and the net proceeds from the New Senior Notes
were used to make payments required under the Plan of
Reorganization, including the repayment of the Companys
DIP Facility and a payment of $477.3 million to

F-8



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

certain prepetition lenders, to pay related
transaction costs and to refinance certain debt. See Notes
(11) and (12).

Reorganization items as reported in the four
months ended May 31, 2003 and the fiscal 2002 and 2001
consolidated statements of operations included herein are
comprised of income, expense and loss items that were realized
or incurred by the Debtors as a direct result of the
Companys decision to reorganize under Chapter 11.
Reorganization items were as follows (millions of dollars):

|                                                                                     |       |             |      |      |      |   |      |      |  |   |      |      | 
|------------------------------------------------------------------------------------ | ----- | ----------- | ---- | ---- | ---- | - | ---- | ---- |  | - | ---- | ---- | 
|                                                                                     |       |            
|                                                                                     |       | Predecessor |     
|                                                                                     |       |             |     
|                                                                                     |       | Four        |      |      |     
|                                                                                     |       | Months      |      |      |     
|                                                                                     |       | Ended       |      |      |     
|                                                                                     |       | May 31,     |      |      |     
|                                                                                     |       | 2003        |      |      | 2002 |   |      | 2001 | 
|                                                                                     |       |             |      |      |      |   |      |      | 
|Write-off of deferred financing costs related to
    prepetition domestic borrowings |       | $           |     |      |      | $ |     |      |  | $ | 38.9 |     
|Critical employee retention plan provision                                           |       |             | 11.7 |      |      |   | 7.3  |      |  |   |     |     
|Estimated accrued liability for rejected
    prepetition leases and contracts        |       |             |     |      |      |   | 10.7 |      |  |   |     |     
|Professional fees related to the Filing                                              |       |             | 30.8 |      |      |   | 28.3 |      |  |   | 9.0  |     
|Creditors Trust obligation                                                          |       |             | 2.0  |      |      |   |     |      |  |   |     |     
|Settlement of prepetition liabilities                                                |       |             |     |      |      |   | (1.5 | )    |  |   |     |     
|Other                                                                                |       |             | 0.5  |      |      |   | (0.3 | )    |  |   | (0.1 | )   
|                                                                                     |       |             |      |      |      |   |      |      | 
|                                                                                     | Total |             | $    | 45.0 |      |   | $    | 44.5 |  |   | $    | 47.8 | 
|                                                                                     |       |             |      |      |      |   |      |      | 

On May 30, 2002, the Bankruptcy Court
entered an order approving, among other things, the critical
employee retention plan (the CERP) filed with the
Bankruptcy Court in February 2002 which was designed to
compensate certain critical employees in order to assure their
retention and availability during the Companys
restructuring. The plan has two components which
(i) rewarded critical employees who remained with the
Company (and certain affiliates of the Company who are not
directly involved in the restructuring) during and through the
completion of the restructuring (the Retention
Bonus) and (ii) provided additional incentives to a
more limited group of the most senior critical employees if the
enterprise value upon completing the restructuring exceeded an
established baseline (the Restructuring Performance
Bonus).

Thirty-five percent, or approximately
$3.0 million, of the Retention Bonus was paid on
October 1, 2002. The remaining portion of the Retention
Bonus of approximately $5.9 million was paid on
June 13, 2003. Further, the Restructuring Performance Bonus
provided under the CERP was paid after the consummation of the
restructuring as discussed below.

Based on the Companys compromise total
enterprise value of $1,250.0 million as confirmed by the
Bankruptcy Court, the aggregate amount of the Restructuring
Performance Bonus is $12.1 million. Of the aggregate
$12.1 million, approximately $6.0 million was paid in
cash on July 1, 2003, and approximately $2.0 million
was paid on August 29, 2003 as determined by the
Companys Board of Directors. The remaining portion of the
Restructuring Performance Bonus was paid in 215,935 shares
of restricted units of New Hayes on July 28, 2003. Pursuant
to provisions contained in the CERP, the restricted units will
vest as follows, subject to the participants continued
employment:



| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | one half of the restricted units will vest on the
    first anniversary of the Effective Date, and;
|
| |  | one half of the restricted units will vest on the
    second anniversary of the Effective Date.    

Payments related to Chapter 11 filings not
discussed above consisted primarily of professional fees and
cure payments and were approximately $31.3 million and
$22.4 million during the eight months ended
January 31, 2004 and the four months ended May 31,
2003, respectively. Payments related to Chapter 11

F-9



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

filings were approximately $81.7 million
during fiscal 2002, and consisted primarily of professional fee
payments, critical vendor payments, the Retention Bonus and a
portion of accrued interest and fees under the Companys
prepetition credit agreements. Cash payments with respect to
reorganization items were approximately $5.3 million in
fiscal 2001, and consisted primarily of professional fee
payments.



|    |                                                                         
|--- | ------------------------------------------------------------------------
|(2) | Basis of Presentation and Summary of
    Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation

As discussed in Note (1), the Company filed a
voluntary petition for reorganization relief under
Chapter 11 of the Bankruptcy Code in December 2001 and
emerged from Chapter 11 on June 3, 2003. Upon
emergence from Chapter 11, the Company implemented fresh
start accounting principles pursuant to American Institute of
Certified Public Accountants (AICPA) Statement of
Position 90-7, Financial Reporting by Entities in
Reorganization under the Bankruptcy Code:
(SOP 90-7). SOP 90-7 requires the
segregation of liabilities subject to compromise by the
Bankruptcy Court as of the bankruptcy filing date, and
identification of all transactions and events that are directly
associated with the reorganization. See Note (3), Fresh
Start Accounting. As a result of the application of fresh start
accounting on May 31, 2003, and in accordance with
SOP 90-7, the post-emergence financial results of the
Company for the period ending January 31, 2004 are
presented as the Successor and the pre-emergence
financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor.
Comparative financial statements do not straddle the emergence
date because in effect the Successor Company represents a new
entity. Per share and share information for the Predecessor
Company for all periods presented on the consolidated statement
of operations have been omitted as such information is deemed to
be not meaningful.



| |                                               
| | ----------------------------------------------
| | Summary of Significant Accounting
    Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation. The Companys investments in
joint ventures are accounted for under the equity method.
Financial position as of January 31, 2004 and 2003 and
results of operations for the eight months ended
January 31, 2004, the four months ended
May 31st and the years end January 31, 2003 and
2002, respectively, for these joint ventures were not material
to the consolidated financial statements of the Company. Balance
sheet amounts for the Companys international subsidiaries
are as of December 31st. The results of operations of the
Companys international subsidiaries included in the
consolidated statements of operations are for the respective
twelve month periods ended December 31st.



| |                    
| | -------------------
| | Revenue Recognition

The Company recognizes revenue, net of estimated
pricing adjustments, when there is evidence of a sale agreement,
the delivery of goods has occurred, the sales price is fixed or
determinable and the collectibility of revenue is reasonably
assured.



| |                    
| | -------------------
| | Accounts Receivable

Accounts receivable are recorded at the invoiced
amount and do not bear interest. The allowance for doubtful
accounts is the Companys best estimate of the amount of
probable losses in existing accounts receivable.

F-10



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |            
| | -----------
| | Inventories

Inventories are stated at the lower of cost or
market, with cost determined principally by the first-in,
first-out (FIFO) or average cost method. Cost includes the
cost of materials, direct labor and the applicable share of
manufacturing overhead. Spare parts and indirect supply
inventories are stated at cost and charged to earnings as used.



| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment are recorded at
cost. Depreciation is generally provided on a straight-line
basis at rates which are designed to write off the assets over
their estimated useful lives, principally as follows:

|                        |  |  |              | 
|----------------------- |  |  | ------------ | 
|Buildings               |  |  | 12-25  years | 
|Machinery and equipment |  |  | 1-10 years   | 

Expenditures for maintenance, repairs and minor
replacements of $47.2 million, $24.3 million,
$85.6 million and $86.2 million for the eight months
ended January 31, 2004, the four months ended May 31,
2003 and for the years ended January 31, 2003 and 2002,
respectively, were charged to expense as incurred.



| |                
| | ---------------
| | Special Tooling

Expenditures made to meet special tooling
requirements are capitalized. Special tooling which is
reimbursable by the customer is classified as either a current
asset in accounts receivable or as other non-current assets in
the consolidated balance sheets, depending upon the expected
time of reimbursement. Special tooling which is not reimbursable
by the customer is classified as an other non-current asset and
is charged to cost of goods sold on a straight-line basis over a
five year period or the estimated useful life, whichever is
shorter.



| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets

On February 1, 2002, the Company adopted
Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets.
Under SFAS No. 142, goodwill and other
indefinite-lived intangible assets are no longer amortized;
rather those assets must be tested for impairment annually.
Other definite-lived intangible assets continue to be amortized
over their estimated lives. (See Note (7).)



| |                                
| | -------------------------------
| | Impairment of Long-lived Assets

In accordance with SFAS No. 144,
Accounting for Impairment or Disposal of Long-lived
Assets, the Company reviews the carrying value of
long-lived assets, including definite-lived intangible assets,
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to
the undiscounted future net cash flows expected to be generated
by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair values less costs to sell, and are
no longer depreciated. (See Notes (6) and (14).)



| |                               
| | ------------------------------
| | Research and Development Costs

Research and development costs are expensed as
incurred. Amounts expensed during the eight months ended
January 31, 2004, the four months ended May 31, 2003
and the years ended January 31, 2003 and 2002, were
approximately $2.9 million, $1.5 million,
$7.1 million and $10.5 million, respectively.

F-11



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                      
| | ---------------------
| | Financial Instruments

The carrying amounts of cash and cash
equivalents, receivables, and accounts payable and accrued
liabilities approximate fair value because of the short maturity
of these instruments. The carrying amount of bank borrowings,
variable rate long-term debt, and other liabilities approximate
market value, as interest rates vary with market rates. The Fair
value of the 10 1/2% New Senior Notes, with a
$250 million aggregate principal amount, was
$287.5 million as of January 31, 2004.

In accordance with industry practice, the costs
or benefits of fluctuations in aluminum prices are passed
through to customers. Futures contracts and purchase commitments
are entered into by the Company, from time to time, to hedge its
exposure to future increases in aluminum prices that may occur
between the dates of aluminum wheel price adjustments.
Outstanding contracts represent future commitments and are not
included in the consolidated balance sheet. Substantially all of
such contracts mature within a period of three months to six
months. Gains or losses resulting from the liquidation of
futures contracts are recognized in the income statement
currently as part of cost of goods sold.

On February 1, 2001, the Company adopted
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, SFAS 137,
Accounting for Derivative Instruments and Hedging
Activities  Deferral of the Effective Date of FASB
Statement No. 133, and SFAS 138,
Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of FASB Statement
No. 133. The adoption of these standards did not have
a material impact on the Companys financial position or
results of operations.

The Company has significant investments in
foreign subsidiaries. The majority of these investments are in
Europe wherein the Euro is the functional currency. As a result,
the Company is exposed to fluctuations in exchange rates between
the Euro and the U.S. Dollar. To reduce this exposure, the
Company had previously entered into cross-currency interest rate
swap agreements. The fair value of such cross-currency interest
rate swaps is the estimated amount the Company would receive or
pay to terminate the agreement based on third party market
quotes. The Company held no cross-currency interest rate swaps
at January 31, 2004 or 2003. During fiscal 2001, the
Company received net cash in the amount of $10.1 million in
connection with the early termination of all cross-currency
interest rate swap agreements. These payments reduced the fair
market value recorded by the Company resulting from accounting
for mark-to-market adjustments during the terms of the
agreements.

The Company records the gain or loss on the
derivative financial instruments designated as hedges of the
foreign currency exposure of its net investment in foreign
operations as currency translation adjustments in accumulated
other comprehensive loss to the extent the hedges are effective.
The gain or loss on the hedging instruments offset the change in
currency translation adjustments resulting from translating the
foreign operations financial statements from their
respective functional currency to the Dollar. In the eight
months ended January 31, 2004, the Company entered into
forward exchange contracts whereby it will sell Euros for U.S.
Dollars. As of January 31, 2004, the Company held
7.2 million
notional amount of such forward exchange contracts. During the
eight months ended January 31, 2004, the Company recorded a
loss of $0.5 million on instruments designated as hedges in
accumulated other comprehensive income. In fiscal 2001, the
Company recorded a loss of $7.5 million on the instruments
designated as hedges in accumulated other comprehensive loss. As
these derivative financial instruments were accounted for as
qualifying hedges prior to adoption of SFAS No. 133,
no transition adjustment was recorded at the date of adoption.
During the four months ended May 31, 2003 and fiscal 2002,
the Company held no derivative financial instruments.



| |                             
| | ----------------------------
| | Foreign Currency Translation

Translation of assets and liabilities of
subsidiaries denominated in foreign currencies are translated at
the rate of exchange in effect on the balance sheet date; income
and expenses are translated at the average rates of exchange
prevailing during the year. The related translation adjustments
are reflected in the accumulated

F-12



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

other comprehensive income (loss) section of
Stockholders Equity (Deficit). Foreign currency gains and
losses resulting from transactions in foreign currencies are
included in results of operations.



| |                
| | ---------------
| | Taxes on Income

Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date. A valuation allowance is recognized to
reduce the deferred tax assets to the amount management believes
is more likely than not to be realized.



| |                         
| | ------------------------
| | Statements of Cash Flows

For purposes of reporting cash flows, the Company
considers all investments with an original maturity of three
months or less to be cash equivalents. The following is
additional information to the Consolidated Statements of Cash
Flows (millions of dollars):

|                                                                                                                                              |                                     |             |      |      |             |   |     |             |  |   |             |     |  |   |       |   | 
|--------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------- | ---- | ---- | ----------- | - | --- | ----------- |  | - | ----------- | --- |  | - | ----- | - | 
|                                                                                                                                              |                                     |             |      |     
|                                                                                                                                              |                                     | Successor   |      |      | Predecessor |  
|                                                                                                                                              |                                     |             |      |      |             |  
|                                                                                                                                              |                                     | Eight       |      |      | Four        |   |     |            
|                                                                                                                                              |                                     | Months      |      |      | Months      |   |     | Year        |  |   | Year        |    
|                                                                                                                                              |                                     | Ended       |      |      | Ended       |   |     | Ended       |  |   | Ended       |    
|                                                                                                                                              |                                     | January 31, |      |      | May 31,     |   |     | January 31, |  |   | January 31, |    
|                                                                                                                                              |                                     | 2004        |      |      | 2003        |   |     | 2003        |  |   | 2002        |    
|                                                                                                                                              |                                     |             |      |      |             |   |     |             |  |   |             |    
|Cash paid for interest, excluding adequate
    protection payments in the four months ended May 31, 2003
    and fiscal 2002 (See Note (12).) |                                     | $           | 37.7 |      |             | $ | 5.8 |             |  | $ | 12.5        |     |  | $ | 113.2 |  
|Cash paid for income taxes, net of refunds
    received                                                                                       |                                     |             | 24.6 |      |             |   | 2.9 |             |  |   | 4.3         |     |  |   | 11.9  |  
|Non-cash investing and financing activity:                                                                                                    |                                     |             |      |      |             |   |     |             |  |   |             |     |  |   |       |  
|                                                                                                                                              | Notes issued to purchase businesses |             |      | 11.6 |             |   |     |            |  |   |             | 2.0 |  |   |       |  | 



| |               
| | --------------
| | Loss per Share

Basic loss per share is calculated by dividing
net loss by the weighted average number of common shares
outstanding. Weighted average shares outstanding include vested
restricted stock units as discussed in Note (17), Long-Term
Incentive Plan. Diluted loss per share is computed by dividing
net loss by the diluted weighted average shares outstanding.
Diluted weighted average shares assume the exercise of stock
options and warrants, so long as they are not anti-dilutive.

Shares outstanding for the eight months ended
January 31, 2004, were as follows (thousands of shares):

|                                            |  |  |        | 
|------------------------------------------- |  |  | ------ | 
|Weighted average shares outstanding         |  |  | 30,011 | 
|Dilutive effect of options and warrants     |  |  |       | 
|                                            |  |  |       
|Diluted weighted average shares outstanding |  |  | 30,011 | 
|                                            |  |  |       

For the eight months ended January 31, 2004,
approximately 3.9 million shares attributable to options
and warrants, and 100,000 shares of subsidiary preferred stock,
which are convertible into common stock of the Company, were
excluded from the calculation of diluted loss per share as the
effect was anti-dilutive due to the net loss reflected for such
period.

F-13



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                     
| | --------------------
| | Comprehensive Income

SFAS No. 130, Reporting
Comprehensive Income, establishes standards for the
reporting and display of comprehensive income. Comprehensive
income is defined as all changes in a Companys net assets
except changes resulting from transactions with shareholders. It
differs from net income in that certain items currently recorded
to equity would be a part of comprehensive income.

The components of accumulated other comprehensive
income (loss) were as follows (millions of dollars):

|                                                                    |       |             |      |      |             |   |       |        |  
|------------------------------------------------------------------- | ----- | ----------- | ---- | ---- | ----------- | - | ----- | ------ | -
|                                                                    |       | Successor   |      |      | Predecessor |  
|                                                                    |       |             |      |      |             |  
|                                                                    |       | January 31, |      |      | January 31, |  
|                                                                    |       | 2004        |      |      | 2003        |  
|                                                                    |       |             |      |      |             |  
|Currency translation adjustments                                    |       | $           | 93.9 |      |             | $ | (44.4 | )     
|Minimum pension liability adjustment, net of
    income tax of zero |       |             |     |      |             |   | (62.8 | )     
|                                                                    |       |             |      |      |             |  
|                                                                    | Total |             | $    | 93.9 |             |   | $     | (107.2 | )
|                                                                    |       |             |      |      |             |  



| |                         
| | ------------------------
| | Stock-Based Compensation

The Company accounts for its stock-based
compensation in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price
of the underlying stock exceeds the exercise price. The Company
follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, and discloses pro forma net
income (loss) and pro forma earnings (loss) per share as if
employee stock option grants were treated as compensation
expense using the fair-value-based method defined in
SFAS No. 123.

In December 2002, the Financial Accounting
Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment
of FASB Statement No. 123. This Statement amends
SFAS No. 123 to provide alternative methods of
transition for a voluntary change to the fair value method of
accounting for stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements.

During the eight months ended January 31,
2004, the Company granted 1,917,451 stock options and 1,278,300
restricted units to certain employees and officers (excluding
those restricted shares granted under the CERP), and 65,455
options and 43,637 restricted units to non-employee members of
the Companys Board of Directors under the Long-Term
Incentive Plan (see Note (17)). The weighted average
exercise price of the stock options was $13.97 per share,
which was equal to the fair value on the date of grant. If
compensation expense had been determined based on the fair value
at the grant date consistent with the

F-14



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

method prescribed in SFAS No. 123, the
Companys net loss and loss per share amounts would have
been adjusted to the pro forma amounts below (millions of
dollars):

|                                  |             |              |   |       |  
|--------------------------------- | ----------- | ------------ | - | ----- | -
|                                  |             | Successor    |  
|                                  |             |              |  
|                                  |             | Eight Months |  
|                                  |             | Ended        |  
|                                  |             | January 31,  |  
|                                  |             | 2004         |  
|                                  |             |              |  
|Net loss:                         |             |              |   |      
|                                  | As reported |              | $ | (46.5 | )
|                                  | Pro forma   |              |   | (50.3 | )
|Basic and diluted loss per share: |             |              |   |      
|                                  | As reported |              | $ | (1.55 | )
|                                  | Pro forma   |              |   | (1.68 | )

As of the Effective Date, all options under the
Predecessor Companys stock option plans were cancelled and
those plans were terminated. Accordingly, no pro forma net
income (loss) or pro forma earnings (loss) per share have been
presented for any of the stock options granted under those
terminated plans.

The fair values of stock options granted in
fiscal 2003 were estimated on the respective dates of grant
using the Black-Scholes option-pricing model. The weighted
average fair values and related assumptions were:

|                             |  |  |       |  
|---------------------------- |  |  | ----- | -
|Weighted average fair values |  |  | $7.11 |  
|Expected volatility          |  |  | 49.0  | %
|Risk free interest rate      |  |  | 3.60  | %
|Expected lives (years)       |  |  | 6.0   |  

Dividend yield for all grants was assumed to be
insignificant.



| |                 
| | ----------------
| | Use of Estimates

The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Considerable judgment is often
involved in making these determinations; the use of different
assumptions could result in significantly different results.
Management believes its assumptions and estimates are reasonable
and appropriate, however actual results could differ from those
estimates.



| |                                                            
| | -----------------------------------------------------------
| | Asset impairment losses and other
    restructuring charges

The Companys consolidated statements of
operations reflect an element of operating expenses described as
asset impairment losses and other restructuring charges. The
Company periodically evaluates whether events and circumstances
have occurred that indicate that the remaining useful life of
any of its long-lived assets may warrant revision or that the
remaining balance might not be recoverable. When factors
indicate that the long-lived assets should be evaluated for
possible impairment, the Company uses an estimate of the future
undiscounted cash flows generated by the underlying assets to
determine if a write-down is required. If a write-down is
required, the Company adjusts the book value of the impaired
long-lived assets to their estimated fair values. Fair value is
determined through third party appraisals or discounted cash
flow calculations. The related charges are recorded as asset
impairment losses or, in the case of certain exit costs in
connection with a plant closure or restructuring, a
restructuring or other charge in the accompanying consolidated
statements of operations.

F-15



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A number of decisions have occurred or other
factors have indicated that these types of charges are required
to be currently recognized (see Note (14)). There can be no
assurance that there will not be additional charges based on
future events and that the additional charges would not have a
materially adverse impact on the Companys financial
position and results of operations.



| |                  
| | -----------------
| | Reclassifications

Certain prior period amounts have been
reclassified to conform to the current year presentation.
Effective February 1, 2003, the Company reclassified an
extraordinary gain on extinguishment of debt of
$2.7 million, net of tax of $1.5 million, realized
during the year ended January 31, 2002 to gain on
extinguishment of debt upon the adoption of Statement of
Financial Accounting Standards No. 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections as of April
2002.



|    |                       
|--- | ----------------------
|(3) | Fresh Start Accounting

Pursuant to SOP 90-7, the accounting for the
effects of the Companys reorganization occurred once the
Plan of Reorganization was confirmed by the Bankruptcy Court and
there were no remaining contingencies material to completing the
implementation of the plan. The fresh start accounting
principles pursuant to SOP 90-7 provide, among other
things, for the Company to determine the value to be assigned to
the equity of the reorganized Company as of a date selected for
financial reporting purposes. As discussed in Note (1), the
Debtors emerged from Chapter 11 on June 3, 2003, and
the Company selected May 31, 2003 for financial reporting
purposes as the date to implement fresh start accounting
principles.

Pursuant to SOP 90-7, the results of
operations of the Company ended May 31, 2003 include
(i) a pre-emergence extraordinary gain of
$1,076.7 million resulting from the discharge of debt and
other liabilities under the Plan of Reorganization;
(ii) pre-emergence charges to earnings of
$25.9 million recorded as Reorganization items related to
certain costs and expenses resulting from the Plan of
Reorganization becoming effective; and (iii) a
pre-emergence pre-tax gain of $63.1 million
($17.1 million, net of tax) resulting from the aggregate
remaining changes to the net carrying value of the
Companys pre-emergence assets and liabilities to reflect
the fair values under fresh start accounting.

The Companys compromise total enterprise
value at the Effective Date was $1,250.0 million, with a
total value for common equity of $544.4 million, excluding
the estimated fair value of the Preferred Stock and the
Series A Warrants and Series B Warrants issued on the
Effective Date. The Preferred Stock is classified as a liability
in the consolidated balance sheet and referred to as redeemable
preferred stock of subsidiary. Under fresh start accounting, the
compromise total enterprise value has been allocated to the
Companys assets based on their respective fair values in
conformity with the purchase method of accounting for business
combinations in accordance with SFAS No. 141,
Business Combinations; any portion not attributed to
specific tangible or identified intangible assets has been
recorded as an indefinite-lived intangible asset referred to as
reorganization value in excess of amounts allocable to
identifiable assets and reported as goodwill. The
valuations required to determine the fair value of certain of
the Companys assets as presented below represent the
results of the valuation procedures performed by the
Companys valuation specialist at May 31, 2003.



| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | Compromise Total Enterprise Value;
    Reorganization Value in Excess of Amounts Allocable to
    Identifiable Assets (Goodwill)

The compromise total enterprise value
(reorganization value) represents the amount of resources
available, or that become available, for the satisfaction of
post-petition liabilities and allowed claims, as negotiated
between the Debtors and the creditors (the interested
parties). This value along with other terms of the Plan of
Reorganization was determined only after extensive arms-length
negotiations amongst the interested parties. Each interested
party developed its view of what the value should be based
primarily upon expected future cash flows of the business after
emergence from Chapter 11, discounted at rates reflecting

F-16



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

perceived business and financial risks. This
value is viewed as the fair value of the entity before
considering liabilities and approximates the amount a willing
buyer would pay for the assets of the Company immediately after
restructuring.

The amount of reorganization value in excess of
amounts allocated to identifiable assets (goodwill) is a
function of compromise total enterprise value. While the Company
believes that the compromise total enterprise value approximates
fair value, differences between the methodology used in testing
for goodwill impairment, as discussed in Note (7), and the
negotiated value could adversely impact the Companys
future results of operations.

The consolidated balance sheet presented below
gives effect to the Plan of Reorganization and the application
of fresh start accounting at May 31, 2003.

F-17



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

REORGANIZED CONDENSED CONSOLIDATED BALANCE
SHEET

May 31, 2003

|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |        |        |        |   |       |       |         | 
|-------------------------------------------------- | ---------------------------------------- | -------------------------------------------------------- | ------- | -------- | ------------- | - | -------- | --------------- | ------- | - | ----------- | --------- | ---- | ------- | ------ | ------ | ------ | - | ----- | ----- | ------- | 
|                                                   |                                          | Predecessor                                              |         |          | Discharge of  |   |          |                 |         |   |             | Successor |     
|                                                   |                                          | May 31,                                                  |         |          | Debt and Exit |   |          | Cancellation of |         |   | Fresh Start |           |      | May 31, |       
|                                                   |                                          | 2003                                                     |         |          | Financing     |   |          | Old Equity      |         |   | Adjustments |           |      | 2003    |       
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                   |                                          |                                                         
|                                                   |                                          | (Millions of dollars)                                    |        
|ASSETS                                            
|Current assets:                                    |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |        |        |        |   |       |      
|                                                   | Cash and cash equivalents                |                                                          | $       | 89.3     |               |   | $        | 89.8            | (a)     |   | $           |          |      |         | $      |       |        |   | $     | 179.1 |        
|                                                   | Receivables                              |                                                          |         | 299.9    |               |   |          |                |         |   |             |          |      |         |        |       |        |   |       | 299.9 |        
|                                                   | Inventories                              |                                                          |         | 186.0    |               |   |          |                |         |   |             |          |      |         |        | 5.2    | (j)    |   |       | 191.2 |        
|                                                   | Prepaid expenses and other               |                                                          |         | 27.0     |               |   |          | 1.3             | (b)     |   |             |          |      |         |        | (7.8   | )(k)   |   |       | 20.5  |        
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                   |                                          | Total current assets                                     |         |          | 602.2         |   |          |                 | 91.1    |   |             |           |     |         |        |        | (2.6   | ) |       |       | 690.7   | 
|Property, plant and equipment, net                 |                                          |                                                          | 959.7   |          |               |   | 54.0     | (c)             |         |   |            |           |      |         | (95.3  | )(l)   |        |   | 918.4 |      
|Old goodwill                                       |                                          |                                                          | 198.3   |          |               |   |         |                 |         |   |            |           |      |         | (198.3 | )(m)   |        |   |      |      
|New goodwill                                       |                                          |                                                          |        |          |               |   |         |                 |         |   |            |           |      |         | 390.9  | (n)    |        |   | 390.9 |      
|Intangible assets                                  |                                          |                                                          | 103.8   |          |               |   |         |                 |         |   |            |           |      |         | 121.9  | (o)    |        |   | 225.7 |      
|Other assets                                       |                                          |                                                          | 60.9    |          |               |   | 19.9     | (d)             |         |   |            |           |      |         | 0.4    | (k)(l) |        |   | 81.2  |      
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                   |                                          | Total assets                                             |         | $        | 1,924.9       |   |          | $               | 165.0   |   |             | $         |     |         |        | $      | 217.0  |   |       | $     | 2,306.9 | 
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                  
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)
|Current liabilities:                               |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |        |        |        |   |       |      
|                                                   | DIP facility                             |                                                          | $       | 59.7     |               |   | $        | (59.7           | )(e)    |   | $           |          |      |         |        |       |        |   | $     |      |        
|                                                   | Bank borrowings and other notes          |                                                          |         | 13.0     |               |   |          |                |         |   |             |          |      |         |        |       |        |   |       | 13.0  |        
|                                                   | Current portion of long-term debt        |                                                          |         | 39.6     |               |   |          | 4.5             | (f)     |   |             |          |      |         |        |       |        |   |       | 44.1  |        
|                                                   | Accounts payable and accrued liabilities |                                                          |         | 303.8    |               |   |          | 33.6            | (g)     |   |             |          |      |         |        | 9.1    | (k)(p) |   |       | 346.5 |        
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                   |                                          | Total current liabilities                                |         |          | 416.1         |   |          |                 | (21.6   | ) |             |           |     |         |        |        | 9.1    |   |       |       | 403.6   | 
|Long-term debt, net of current portion             |                                          |                                                          | 62.0    |          |               |   | 31.0     | (f)             |         |   |            |           |      |         |       |        |        |   | 93.0  |      
|New Term Loan                                      |                                          |                                                          |        |          |               |   | 445.5    | (f)             |         |   |            |           |      |         |       |        |        |   | 445.5 |      
|New Senior Notes, net of discount                  |                                          |                                                          |        |          |               |   | 248.5    | (f)             |         |   |            |           |      |         |       |        |        |   | 248.5 |      
|Pension and other long-term liabilities            |                                          |                                                          | 343.5   |          |               |   | 0.5      | (g)             |         |   |            |           |      |         | 195.5  | (k)(p) |        |   | 539.5 |      
|Series A Warrants and Series B Warrants            |                                          |                                                          |        |          |               |   | 9.3      | (f)             |         |   |            |           |      |         |       |        |        |   | 9.3   |      
|Redeemable preferred stock of subsidiary           |                                          |                                                          |        |          |               |   | 10.0     | (f)             |         |   |            |           |      |         |       |        |        |   | 10.0  |      
|Minority interest                                  |                                          |                                                          | 17.8    |          |               |   |         |                 |         |   |            |           |      |         | (4.7   | )(q)   |        |   | 13.1  |      
|Liabilities subject to compromise                  |                                          |                                                          | 2,153.4 |          |               |   | (2,153.4 | )(h)            |         |   |            |           |      |         |       |        |        |   |      |      
|Commitments and contingencies                      |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |        |        |        |   |       |      
|Stockholders equity (deficit):                    |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |        |        |        |   |       |      
|                                                   | New Common Stock                         |                                                          |         |         |               |   |          | 0.3             | (f)     |   |             |          |      |         |        |       |        |   |       | 0.3   |        
|                                                   | New additional paid-in capital           |                                                          |         |         |               |   |          | 544.1           | (f)     |   |             |          |      |         |        |       |        |   |       | 544.1 |        
|                                                   | Old Common Stock                         |                                                          |         | 0.3      |               |   |          |                |         |   |             | (0.3      | )(i) |         |        |       |        |   |       |      |        
|                                                   | Old additional paid in capital           |                                                          |         | 235.1    |               |   |          |                |         |   |             | (235.1    | )(i) |         |        |       |        |   |       |      |        
|                                                   | Old common stock in treasury at cost     |                                                          |         | (25.7    | )             |   |          |                |         |   |             | 25.7      | (i)  |         |        |       |        |   |       |      |        
|                                                   | Accumulated deficit                      |                                                          |         | (1,201.8 | )             |   |          | 1,050.8         | (h)     |   |             | 209.7     | (i)  |         |        | (58.7  | )(m)   |   |       |      |        
|                                                   | Accumulated other comprehensive loss     |                                                          |         | (75.8    | )             |   |          |                |         |   |             |          |      |         |        | 75.8   | (m)    |   |       |      |        
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                   |                                          | Total stockholders equity
    (deficit)                 |         |          | (1,067.9      | ) |          |                 | 1,595.2 |   |             |           |     |         |        |        | 17.1   |   |       |       | 544.4   | 
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       
|                                                   |                                          | Total liabilities and stockholders equity
    (deficit) |         | $        | 1,924.9       |   |          | $               | 165.0   |   |             | $         |     |         |        | $      | 217.0  |   |       | $     | 2,306.9 | 
|                                                   |                                          |                                                          |         |          |               |   |          |                 |         |   |             |           |      |         |       

F-18



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Adjustments reflected in the reorganized
condensed consolidated balance sheet are as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Represents adjustment to reflect a
    portion of the proceeds from the New Senior Notes and the New
    Credit Facility, net of a $13.0 million cash payment to
    former holders of the Companys 11 7/8% Senior
    Notes due 2006 (the Old Senior Notes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | b) Represents escrowed property taxes and
    insurance required in connection with exit financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | c) Represents capitalization of
    $54.0 million of assets resulting from repayment or
    refinancing of certain synthetic leases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | d) Represents recognition of debt issuance
    costs recorded as other assets consisting of fees and expenses
    of the New Credit Facility of $13.9 million, and fees and
    expenses of the New Senior Notes of $6.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | e) Represents repayment of the DIP Facility
    on the Effective Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | f) Represents new capitalization structure
    after giving effect to the Plan of Reorganization. The Company
    recorded the Series A Warrants and Series B Warrants
    at fair value. The Company also determined that its
    Series A Warrants and Series B Warrants met the
    criteria for classification as liabilities. As such they will be
    measured at fair value at each reporting period with changes in
    fair value recognized in interest expense. The Company also has
    recorded the redeemable preferred stock at fair value which
    equals the stated liquidation preference. The fair value of the
    redeemable preferred stock was $10.0 million and the
    Series A Warrants and Series B Warrants fair value was
    approximately $9.3 million at emergence. The Series A
    Warrants and Series B Warrants were valued utilizing the
    Black-Scholes model that requires the estimation of several
    variables in the formula. The redeemable preferred stock of
    subsidiary was valued using a market/capitalization
    approach that capitalizes the dividend stream of similar
    instruments issued by a comparative group using capitalization
    rates that reflect prevailing market yields. The use of this
    approach provides a range of possible fair values. This range
    was evaluated by the Company before it selected a capitalization
    rate of 8% which approximated the mean rate of the comparative
    group. The use of different valuation techniques could have
    resulted in different conclusions of the fair value of these
    instruments.

F-19



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | g) Represents accrual or settlement of
    short- and long-term liabilities upon emergence under the Plan
    of Reorganization as follows (millions of dollars):

|                                                                                                           |                                                                                                          |   |       |      | 
|---------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | - | ----- | ---- | 
|Accrual of contingent professional fees                                                                    |                                                                                                          | $ | 8.5   |     
|Accrual of the portion of the Restructuring
    Performance Bonus component of the CERP to be paid in cash |                                                                                                          |   | 9.0   |     
|Accrual of obligation to fund the Creditors
    Trust                                                     |                                                                                                          |   | 1.5   |     
|Payment of accrued professional fees                                                                       |                                                                                                          |   | (13.1 | )   
|Payment of accrued interest on the DIP Facility                                                            |                                                                                                          |   | (0.4  | )   
|Deferral of cure payments for assumed contracts
    and other priority and administrative claims           |                                                                                                          |   | 19.2  |     
|Accrual of state tax liability for restructuring
    transactions upon emergence                           |                                                                                                          |   | 6.5   |     
|Other accrued liabilities incurred upon emergence                                                          |                                                                                                          |   | 2.9   |     
|                                                                                                           |                                                                                                          |   |      
|                                                                                                           | Net adjustment to accounts payable, accrued
    liabilities, and pension and other long-term liabilities |   | $     | 34.1 | 
|                                                                                                           |                                                                                                          |   |      



| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | h) Represents the elimination of
    pre-petition liabilities discharged under the Plan of
    Reorganization as follows (millions of dollars):

|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |         |        |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------- | ------ | ------- | 
|Liabilities subject to compromise                                                                                                                                                                   |                                                                                                                                                                                                                                                   | $                                     | 2,153.4 |       
|Form of settlement:                                                                                                                                                                                 |                                                                                                                                                                                                                                                   |                                       |         |       
|                                                                                                                                                                                                    | Issuance of New Common Stock of
    HoldCo.                                                                                                                                                                                                       |                                       |         | (544.4 | )      
|                                                                                                                                                                                                    | Issuance of New Preferred Stock of HLI                                                                                                                                                                                                            |                                       |         | (10.0  | )      
|                                                                                                                                                                                                    | Issuance of Series A Warrants and
    Series B Warrants                                                                                                                                                                                           |                                       |         | (9.3   | )      
|                                                                                                                                                                                                    | Repayment of remaining Old Senior Note proceeds                                                                                                                                                                                                   |                                       |         | (13.0  | )      
|                                                                                                                                                                                                    | Prepetition Lenders Payment Amount                                                                                                                                                                                                               |                                       |         | (477.3 | )      
|                                                                                                                                                                                                    | Amounts reclassified to accounts payable and
    accrued liabilities for certain estimated cure payments with
    respect to assumption of prepetition executory contracts and
    unexpired leases, and other priority and administrative claims |                                       |         | (22.7  | )      
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |        
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   | Gain on discharge of debt             |         |        | 1,076.7 | 
|Accrual of estimated contingent professional
    fees, cash portion of the Restructuring Performance Bonus,
    Creditors Trust obligation and tax expense related to
    restructuring activities |                                                                                                                                                                                                                                                   |                                       | (25.9   | )     
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |        
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   | Net adjustment to accumulated deficit |         | $      | 1,050.8 | 
|                                                                                                                                                                                                    |                                                                                                                                                                                                                                                   |                                       |        



| |                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i) Represents cancellation of Old Common
    Stock under fresh start accounting.                                                                                                                                                                                                                                                                     
|
| | j) Represents adjustment to reflect the
    increase in the fair value of inventory under fresh start
    accounting. Work-in-process and finished goods were valued at
    the expected selling price less costs to complete, selling and
    disposal cost and a normal profit. Raw materials and supplies
    were valued using the cost approach.

F-20



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | k) Represents the adjustment of deferred tax
    assets and liabilities resulting from fair value adjustments
    under fresh start accounting as follows:

|                                         |                |   |       |       |  
|---------------------------------------- | -------------- | - | ----- | ----- | -
|Prepaid expenses and other               |                | $ | (7.8  | )    
|Other assets                             |                |   | 4.5   |      
|Accounts payable and accrued liabilities |                |   | (2.4  | )    
|Pension and other long-term liabilities  |                |   | (46.3 | )    
|                                         |                |   |      
|                                         | Net adjustment |   | $     | (52.0 | )
|                                         |                |   |      



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | l) Primarily represents net adjustments to
    reflect the decrease of property, plant, equipment and tooling
    to fair value under fresh start accounting based on results of
    valuation procedures performed by the Companys valuation
    specialist. The valuation methodologies employed included the
    use of the market value and replacement cost approach for
    personal property and the use of the cost, income and sales
    comparison approaches for real property.
|
| | m) Represents elimination of pre-emergence
    goodwill, equity accounts and retained earnings under fresh
    start accounting.                                                                                                                                                                                                                                                                                                                                                           
|
| | n) Represents new goodwill resulting from
    the excess of reorganization value over the amounts allocable to
    the fair value of identifiable assets and liabilities.                                                                                                                                                                                                                                                                                                                  



| |                                                                               
| | ------------------------------------------------------------------------------
| | The allocation of compromise enterprise value and
    goodwill was as follows:

|                     |                                               |                                   |   |         |         | 
|-------------------- | --------------------------------------------- | --------------------------------- | - | ------- | ------- | 
|Assets:              |                                               |                                   |   |        
|                     | Current assets                                |                                   | $ | 690.7   |        
|                     | Property, plant and equipment                 |                                   |   | 918.4   |        
|                     | Goodwill                                      |                                   |   | 390.9   |        
|                     | Intangible assets                             |                                   |   | 225.7   |        
|                     | Other assets                                  |                                   |   | 81.2    |        
|Liabilities:         |                                               |                                   |   |        
|                     | Current liabilities                           |                                   |   | 403.6   |        
|                     | Other long-term liabilities                   |                                   |   | 1,358.9 |        
|                     |                                               |                                   |  
|                     |                                               | New common equity                 |   |         | 544.4   | 
|Assumed obligations: |                                               |                                   |   |        
|                     | New Term Loan, including current portion      |                                   |   | 450.0   |        
|                     | New Senior Notes, net of discount             |                                   |   | 248.5   |        
|                     | Series A Warrants and Series B Warrants       |                                   |   | 9.3     |        
|                     | Redeemable preferred stock of subsidiary      |                                   |   | 10.0    |        
|                     | Other assumed obligations, net of excess cash |                                   |   | (12.2   | )      
|                     |                                               |                                   |  
|                     |                                               | Total compromise enterprise value |   | $       | 1,250.0 | 
|                     |                                               |                                   |  



| |                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o) Represents adjustment of
    $121.9 million to reflect the fair value of identified
    intangible assets based on results of valuation procedures
    performed by the Companys valuation specialist. See
    Note (7) for additional disclosure regarding the category
    of intangibles and a description of the valuation methodology.
|
| | p) Primarily reflects the additional
    liability of $155.2 million under fresh-start accounting
    for any pension and retiree medical plan costs as determined by
    the Companys actuaries. This net additional                                                                                                                         

F-21



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | liability had been deferred pre-emergence in
    accordance with SFAS Nos. 87 and 106. The actuarial
    assumptions used in computing the liabilities were as follows:

|                              |                                |                      |  |      |                     |  |  |                  |   |  |  |         |  
|----------------------------- | ------------------------------ | -------------------- |  | ---- | ------------------- |  |  | ---------------- | - |  |  | ------- | -
|                              |                                |                      |  |     
|                              |                                | North American Plans |  |      | International Plans | 
|                              |                                |                      |  |      |                     | 
|                              |                                | Pension Benefits     |  |      | Other Benefits      |  |  | Pension Benefits |  
|                              |                                |                      |  |      |                     |  |  |                  |  
|Weighted average assumptions: |                                |                      |  |      |                     |  |  |                  |   |  |  |        
|                              | Discount Rate                  |                      |  | 5.75 | %                   |  |  | 5.75             | % |  |  | 5.0-5.5 | %
|                              | Expected return on plan assets |                      |  | 8.0  | %                   |  |  | N/A              |   |  |  | 5.0     | %
|                              | Rate of compensation increase  |                      |  | 4.75 | %                   |  |  | N/A              |   |  |  | 2.1     | %



| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | q) Reflects the adjustment to minority
    interest as a result of fair value adjustments under fresh start
    accounting.



|    |                                                
|--- | -----------------------------------------------
|(4) | Acquisitions and Divestitures of
    Businesses

On November 13, 2003, the Company acquired
an additional 35% ownership interest in its Turkish joint
venture for $13.9 million in cash and will pay an
additional $1.1 million in the first quarter of fiscal
2004. As a result of this acquisition, the Company owns 60% of
the subsidiary, Hayes Lemmerz Jantas Jant Sanayi ve Ticaret
A.S., which became a consolidated subsidiary of the Company
beginning in the fourth quarter of fiscal 2003 (HLI
Jantas). As part of this transaction, the Company sold an
approximate 7.8% interest in another Turkish subsidiary, Hayes
Lemmerz  Inci Jant Sanayi A.S., for
$2.4 million. This sale reduced the Companys holdings
in Hayes Lemmerz  Inci Jant Sanayi A.S. to 60%.

On January 15, 2004, the Company acquired
for $15.7 million a cast aluminum wheel plant located in
Chihuahua, Mexico formerly operated as part of a joint venture
in which the Company owned a 40% minority interest. As part of
this transaction, all of the Companys previously held
common stock in the joint venture was sold to the former joint
venture partner. Following the Companys planned
refurbishment and expansion of the plant, it will serve the
North American wheel market utilizing low pressure casting
technology. As a result of these transactions, the Company no
longer maintains any significant minority interest investments
in joint ventures.

During fiscal 2002, the Company received
$6.6 million in net cash proceeds from the sale of certain
non-core businesses, primarily the sale of the Companys
Brazilian agricultural wheel business, the Schenk aluminum
foundry located in Maulbronn, Germany and the Companys
interest in a Portuguese fabricated wheel joint venture. In
connection with those sales, the Company recognized a net loss
of $0.4 million, which is included in Other income, net on
the accompanying consolidated statement of operations. During
fiscal 2002, the Company paid $5.1 million for the
remaining 24% interest in its South African subsidiary, NF Die
(Proprietary) Ltd., an aluminum wheel manufacturer, and
$2.1 million in cash and an additional $2.0 million
note payable for the facility and assets of a foundry in
Chattanooga, Tennessee.

During fiscal 2001, the Company sold its
interests in its Canadian joint venture, its Venezuelan joint
venture and its tire and wheel assembly business for net cash
proceeds of $20.5 million. In connection with those sales,
the Company recognized a net loss of $7.2 million, which is
included in Other income, net, on the accompanying consolidated
statement of operations.

F-22



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |            
|--- | -----------
|(5) | Inventories

The major classes of inventory are as follows
(millions of dollars):

|                         |       |             |      |       |             |   |      |       | 
|------------------------ | ----- | ----------- | ---- | ----- | ----------- | - | ---- | ----- | 
|                         |       | Successor   |      |       | Predecessor |  
|                         |       |             |      |       |             |  
|                         |       | January 31, |      |       | January 31, |  
|                         |       | 2004        |      |       | 2003        |  
|                         |       |             |      |       |             |  
|Raw materials            |       | $           | 48.3 |       |             | $ | 48.3 |      
|Work-in-process          |       |             | 42.2 |       |             |   | 36.5 |      
|Finished goods           |       |             | 61.8 |       |             |   | 56.2 |      
|Spare parts and supplies |       |             | 37.0 |       |             |   | 35.6 |      
|                         |       |             |      |       |             |  
|                         | Total |             | $    | 189.3 |             |   | $    | 176.6 | 
|                         |       |             |      |       |             |  

In connection with the implementation of fresh
start accounting, the Company revalued its work-in-process and
finished goods to the expected selling price less costs to
complete, selling and disposal cost and a normal profit,
resulting in an increase of $5.2 million. All of this fair
value adjustment had been recognized through cost of sales
during the eight months ended January 31, 2004. (See
Note (3).)



|    |                              
|--- | -----------------------------
|(6) | Property, Plant and Equipment

The major classes of property, plant and
equipment are as follows (millions of dollars):

|                         |                                    |             |         |       |             |   |         |       | 
|------------------------ | ---------------------------------- | ----------- | ------- | ----- | ----------- | - | ------- | ----- | 
|                         |                                    | Successor   |         |       | Predecessor |  
|                         |                                    |             |         |       |             |  
|                         |                                    | January 31, |         |       | January 31, |  
|                         |                                    | 2004        |         |       | 2003        |  
|                         |                                    |             |         |       |             |  
|Land                     |                                    | $           | 42.4    |       |             | $ | 30.4    |      
|Buildings                |                                    |             | 212.5   |       |             |   | 256.0   |      
|Machinery and equipment  |                                    |             | 793.7   |       |             |   | 1.134.5 |      
|Capital lease assets     |                                    |             | 8.4     |       |             |   |        |      
|                         |                                    |             |         |       |             |  
|                         |                                    |             | 1,057.0 |       |             |   | 1,420.9 |      
|Accumulated depreciation |                                    |             | (90.5   | )     |             |   | (469.7  | )    
|                         |                                    |             |         |       |             |  
|                         | Property, plant and equipment, net |             | $       | 966.5 |             |   | $       | 951.2 | 
|                         |                                    |             |         |       |             |  

F-23



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                     
|--- | ------------------------------------
|(7) | Goodwill and Other Intangible Assets

Intangible assets and goodwill consist of the
following (millions of dollars):

|                                 |                                      |                  |       |       |                  |   |       |          |   |       |          |       |  |              |      |       |          |   |       |      |   |   |      |      | 
|-------------------------------- | ------------------------------------ | ---------------- | ----- | ----- | ---------------- | - | ----- | -------- | - | ----- | -------- | ----- |  | ------------ | ---- | ----- | -------- | - | ----- | ---- | - | - | ---- | ---- | 
|                                 |                                      |                  |       |      
|                                 |                                      | Successor        |       |       | Predecessor      |  
|                                 |                                      |                  |       |       |                  |  
|                                 |                                      |                  |       |      
|                                 |                                      | January 31, 2004 |       |       | January 31, 2003 |  
|                                 |                                      |                  |       |       |                  |  
|                                 |                                      | Gross            |       |       |                  |   | Net   |          |   | Gross |          |       |  |              | Net  |      
|                                 |                                      | Carrying         |       |       | Accumulated      |   |       | Carrying |   |       | Carrying |       |  | Accumulated  |      |       | Carrying |  
|                                 |                                      | Amount           |       |       | Amortization     |   |       | Amount   |   |       | Amount   |       |  | Amortization |      |       | Amount   |  
|                                 |                                      |                  |       |       |                  |   |       |          |   |       |          |       |  |              |      |       |          |  
|Amortized intangible assets:     |                                      |                  |       |       |                  |   |       |          |   |       |          |       |  |              |      |       |          |   |       |      |   |   |      |     
|                                 | Customer relationships and contracts |                  | $     | 169.3 |                  |   | $     | (5.8     | ) |       | $        | 163.5 |  |              | $    | 26.5  |          |   | $     | (4.0 | ) |   | $    | 22.5 | 
|                                 | Licenses                             |                  |       |      |                  |   |       |         |   |       |          |      |  |              |      | 13.4  |          |   |       | (2.4 | ) |   |      | 11.0 | 
|                                 | Unpatented technology                |                  |       | 36.7  |                  |   |       | (4.6     | ) |       |          | 32.1  |  |              |      | 33.5  |          |   |       | (8.8 | ) |   |      | 24.7 | 
|                                 | Other                                |                  |       |      |                  |   |       |         |   |       |          |      |  |              |      | 1.9   |          |   |       | (1.0 | ) |   |      | 0.9  | 
|                                 |                                      |                  |       |       |                  |   |       |          |   |       |          |       |  |              |      |       |          |  
|                                 |                                      | $                | 206.0 |       |                  | $ | (10.4 | )        |   | $     | 195.6    |       |  | $            | 75.3 |       |          | $ | (16.2 | )    |   | $ | 59.1 |     
|                                 |                                      |                  |       |       |                  |   |       |          |   |       |          |       |  |              |      |       |          |  
|Non amortized intangible assets: |                                      |                  |       |       |                  |   |       |          |   |       |          |       |  |              |      |       |          |   |       |      |   |   |      |     
|                                 | Tradenames                           |                  | $     | 41.6  |                  |   |       |          |   |       |          |       |  |              | $    | 43.5  |          |   |       |      |   |   |      |      | 
|                                 | Goodwill                             |                  | $     | 416.2 |                  |   |       |          |   |       |          |       |  |              | $    | 191.3 |          |   |       |      |   |   |      |      | 

The Company expects that ongoing amortization
expense will approximate between $13 million and
$16 million in each of the next five fiscal years.

As a result of applying fresh start accounting,
the changes in the net carrying amount of goodwill during fiscal
2003 represent the elimination of $198.3 million of the
Predecessors goodwill, the establishment of
$390.9 million of the Successors goodwill and the
impact of foreign currency translation. Goodwill by segment for
the Successor as of January 31, 2004 and for the
Predecessor as of January 31, 2003 is presented in
Note (18).

Effective February 1, 2002, the Company
adopted SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 requires that
goodwill and indefinite-lived intangible assets be reviewed for
impairment annually, rather than amortized into earnings. Any
impairment to the amount of goodwill existing at the date of
adoption was to be recognized as a cumulative effect of a change
in accounting principle on that date.

Upon adoption of SFAS No. 142 in fiscal
2002, the Company discontinued amortizing goodwill and
indefinite-lived intangible assets into earnings. In connection
with the transitional provisions of the Statement, the Company
performed an assessment of whether there was an indication that
goodwill was impaired as of the adoption date. To accomplish
this, the Company determined the carrying value of each of its
reporting units (i.e., one step below the segment level) by
assigning the assets and liabilities, including existing
goodwill and intangible assets, to the reporting units on
February 1, 2002. As of that date, the Company had
unamortized goodwill and other indefinite-lived intangibles of
approximately $758.7 million that were subject to the
transition provisions of SFAS No. 142. The Company
determined the fair value of each reporting unit and compared
those fair values to the carrying values of each reporting unit.
To the extent the carrying amount of a reporting unit exceeded
the fair value of the reporting unit (indicating that goodwill
may be impaired), the Company performed the second step of the
transitional impairment test. This test was required for five
reporting units.

In the second step, the Company compared the
implied fair value of the reporting units goodwill with
the carrying value of that goodwill, both of which were measured
at the adoption date. The implied fair value of

F-24



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

goodwill was determined by allocating the fair
value of the reporting units to all of the assets (both
recognized and unrecognized) and liabilities of the reporting
units in a similar manner to a purchase price allocation in
accordance with SFAS No. 141, Business
Combinations. The residual fair value after this
allocation was the implied fair value of the reporting
units goodwill. The carrying amounts of these reporting
units exceeded the fair values, and the Company recorded an
impairment charge of $554.4 million as of February 1,
2002 as a cumulative effect of a change in accounting principle
as described above.

The Company employed a discounted cash flow
analysis in conducting its impairment tests. Fair value was
determined based upon the discounted cash flows of the reporting
units. Future cash flows are affected by future operating
performance, which will be impacted by economic conditions, car
builds, financial, business and other factors, many of which are
beyond the Companys control.

The Successor Company has changed its annual test
date from January 31st to November 1st for testing
whether goodwill is impaired. This change is both preferable and
allowed in that (1) choosing the 1st day of the
4th quarter allows adequate time to perform the first step
of the test and, if necessary, the second step of the test while
still providing time to report the impact of the test in the
Companys periodic filings, (2) the Successor Company
has never chosen a test date for goodwill impairment,
(3) goodwill of the Predecessor Company was eliminated as a
result of fresh start accounting, and (4) the Predecessor
Company no longer exists. The Company will test goodwill for
impairment as of November 1st of each fiscal year, or more
frequently should circumstances change or events occur that
would more likely than not reduce the fair value of a reporting
unit below its carrying amount, as provided for in
SFAS No. 142.

The following table presents adjusted net loss on
a comparable basis, by eliminating goodwill amortization from
the reported net loss for the year ended January 31, 2002
(in millions):

|                                |  |             |        |  
|------------------------------- |  | ----------- | ------ | -
|                                |  | Year Ended  |       
|                                |  | January 31, |       
|                                |  | 2002        |       
|                                |  |             |       
|Reported net loss               |  | $           | (396.7 | )
|Eliminate goodwill amortization |  |             | 23.2   |  
|                                |  |             |       
|Adjusted net loss               |  | $           | (373.5 | )
|                                |  |             |       



| |                                                                         
| | ------------------------------------------------------------------------
| | Valuation of Intangible Assets as a Result of
    Fresh Start Accounting

The Company worked with and relied extensively on
the expertise of external valuation consultants in arriving at
its assigned values for intangible assets. In managements
opinion, the valuations appear reasonable and appropriate.



| |                   
| | ------------------
| | Customer Contracts

Value was based on a review of contracts, award
letters and purchase orders in existence for the Companys
Domestic Wheels, Domestic Components, and International Wheels
reporting units. At the Companys International Components
and Commercial Highway reporting units, sales are not generated
or attributed to contracts but rather to customer relationships
and therefore contracts were not valued. Value was determined on
economic profits which exceeded a fair return on assets
employed. The amortization period is based on the remaining
contract terms.



| |                       
| | ----------------------
| | Customer Relationships

Customer relationships refers to likely new
business from existing customers that was not booked as of the
valuation date. Automotive suppliers often receive future
business as a result of being the incumbent on a program.
Management and its outside valuation consultants had discussions
on expected future business based

F-25



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

on historic relationships and trends. Economic
profit was based on expected future sales with a growth rate of
2% exclusive of projected sales under existing contracts. The
amortization period was based on a review of historical data and
discounting of cash flows. The International Components and
Commercial Highway valuations were based on a review of
projections provided which identified sales generated by
existing customers with an attrition rate provided for loss of
customers and indicated that no intangible asset existed for
these reporting units.



| |            
| | -----------
| | Trade Names

The Hayes Lemmerz trade name was
valued using a royalty savings method. It assumes a third party
would be willing to pay for the use of a name which represents a
cost savings to the Company. Our outside valuation consultants
identified other trade name licensing agreements similar to ones
that could be used by the Company as a benchmark for royalty
rates. Using this data and historical use of the Companys
name, premiums earned on our products, excess earnings analysis
and projected profitability identified that the International
Wheels reporting unit could economically support a trade name.
The name is a perpetual, non-wasting asset and therefore an
indefinite life was assigned.



| |                      
| | ---------------------
| | Unpatented Technology

Discussions were held between management and the
external valuation consultant to identify specific technologies
valuable to a potential acquirer. Additional discussions were
then held with product development and engineering personnel to
gain an understanding of the distinctiveness, development stage,
third party agreements, royalty rates charged, and expected
remaining useful life of each technology. The technologies were
valued using a royalty savings method applied to sales
projections for 2003 through 2007. Royalty rates were determined
based on a review of discussions between management and the
external valuation consultant and a review of royalty data for
similar or comparable technologies. The amortization periods are
based on the expected useful lives of the product or product
program to which the technology relates.



|    |             
|--- | ------------
|(8) | Other Assets

Other assets consists of the following (millions
of dollars):

|                                |       |             |      |      |             |   |      |      | 
|------------------------------- | ----- | ----------- | ---- | ---- | ----------- | - | ---- | ---- | 
|                                |       | Successor   |      |      | Predecessor |  
|                                |       |             |      |      |             |  
|                                |       | January 31, |      |      | January 31, |  
|                                |       | 2004        |      |      | 2003        |  
|                                |       |             |      |      |             |  
|Production tooling              |       | $           | 31.2 |      |             | $ | 27.6 |     
|Unamortized debt issuance costs |       |             | 20.2 |      |             |   | 1.6  |     
|Investments in joint ventures   |       |             |     |      |             |   | 4.8  |     
|Other                           |       |             | 26.2 |      |             |   | 8.0  |     
|                                |       |             |      |      |             |  
|                                | Total |             | $    | 77.6 |             |   | $    | 42.0 | 
|                                |       |             |      |      |             |  

F-26



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                             
|--- | --------------------------------------------
|(9) | Accounts Payable and Accrued
    Liabilities

Accounts payable and accrued liabilities consist
of the following (millions of dollars):

|                          |       |             |       |       |             |   |       |       | 
|------------------------- | ----- | ----------- | ----- | ----- | ----------- | - | ----- | ----- | 
|                          |       | Successor   |       |       | Predecessor |  
|                          |       |             |       |       |             |  
|                          |       | January 31, |       |       | January 31, |  
|                          |       | 2004        |       |       | 2003        |  
|                          |       |             |       |       |             |  
|Accounts payable          |       | $           | 196.8 |       |             | $ | 136.7 |      
|Employee costs            |       |             | 88.7  |       |             |   | 75.1  |      
|Other accrued liabilities |       |             | 68.9  |       |             |   | 56.9  |      
|                          |       |             |       |       |             |  
|                          | Total |             | $     | 354.4 |             |   | $     | 268.7 | 
|                          |       |             |       |       |             |  

Accounts payable and accrued liabilities of the
Predecessor at January 31, 2003 exclude any amounts that
are classified as liabilities subject to compromise (see
Note (12)).



|     |                
|---- | ---------------
|(10) | Taxes on Income

The components of pre-tax income (loss),
excluding cumulative effect of change in accounting principle
and extraordinary gain on debt discharge, are as follows
(millions of dollars):

|              |  |             |       |   |             |   |        |             |  |   |             |   |  |   |        |  
|------------- |  | ----------- | ----- | - | ----------- | - | ------ | ----------- |  | - | ----------- | - |  | - | ------ | -
|              |  |             |       |  
|              |  | Successor   |       |   | Predecessor |  
|              |  |             |       |   |             |  
|              |  | Eight       |       |   | Four        |   |        |            
|              |  | Months      |       |   | Months      |   |        | Year        |  |   | Year        |  
|              |  | Ended       |       |   | Ended       |   |        | Ended       |  |   | Ended       |  
|              |  | January 31, |       |   | May 31,     |   |        | January 31, |  |   | January 31, |  
|              |  | 2004        |       |   | 2003        |   |        | 2003        |  |   | 2002        |  
|              |  |             |       |   |             |   |        |             |  |   |             |  
|United States |  | $           | (67.1 | ) |             | $ | (309.9 | )           |  | $ | (137.1      | ) |  | $ | (400.8 | )
|Foreign       |  |             | 35.4  |   |             |   | 337.7  |             |  |   | 64.1        |   |  |   | 19.2   |  
|              |  |             |       |   |             |   |        |             |  |   |             |  
|              |  | $           | (31.7 | ) |             | $ | 27.8   |             |  | $ | (73.0       | ) |  | $ | (381.6 | )
|              |  |             |       |   |             |   |        |             |  |   |             |  

The income tax expense (benefit) is summarized as
follows (millions of dollars):

|          |                   |                    |      |      |             |  |      |             |      |  |             |       |     |  |      |      |      | 
|--------- | ----------------- | ------------------ | ---- | ---- | ----------- |  | ---- | ----------- | ---- |  | ----------- | ----- | --- |  | ---- | ---- | ---- | 
|          |                   |                    |      |     
|          |                   | Successor          |      |      | Predecessor | 
|          |                   |                    |      |      |             | 
|          |                   | Eight              |      |      | Four        |  |      |            
|          |                   | Months             |      |      | Months      |  |      | Year        |      |  | Year        |      
|          |                   | Ended              |      |      | Ended       |  |      | Ended       |      |  | Ended       |      
|          |                   | January 31,        |      |      | May 31,     |  |      | January 31, |      |  | January 31, |      
|          |                   | 2004               |      |      | 2003        |  |      | 2003        |      |  | 2002        |      
|          |                   |                    |      |      |             |  |      |             |      |  |             |      
|Current:  |                   |                    |      |      |             |  |      |             |      |  |             |       |     |  |      |     
|          | Federal           |                    | $    |     |             |  | $    |            |      |  | $           | (14.3 | )   |  | $    |     |     
|          | State and Local   |                    |      | 1.0  |             |  |      | 7.1         |      |  |             | 2.4   |     |  |      | 2.4  |     
|          | Foreign           |                    |      | 11.6 |             |  |      | 1.9         |      |  |             | 1.1   |     |  |      | 10.8 |     
|          |                   |                    |      |      |             |  |      |             |      |  |             |      
|          |                   |                    | 12.6 |      |             |  | 9.0  |             |      |  | (10.8       | )     |     |  | 13.2 |     
|Deferred: |                   |                    |      |      |             |  |      |             |      |  |             |       |     |  |      |     
|          | Federal and State |                    |      |     |             |  |      |            |      |  |             |      |     |  |      |     |     
|          | Foreign           |                    |      | (1.7 | )           |  |      | 51.3        |      |  |             | 14.4  |     |  |      | (1.4 | )   
|          |                   |                    |      |      |             |  |      |             |      |  |             |      
|          |                   |                    | (1.7 | )    |             |  | 51.3 |             |      |  | 14.4        |       |     |  | (1.4 | )   
|          |                   |                    |      |      |             |  |      |             |      |  |             |      
|          |                   | Income Tax Expense |      | $    | 10.9        |  |      | $           | 60.3 |  |             | $     | 3.6 |  |      | $    | 11.8 | 
|          |                   |                    |      |      |             |  |      |             |      |  |             |      

F-27



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A reconciliation of taxes computed at the United
States Federal statutory 35% rate to the actual income tax
expense follows (millions of dollars):

|                                         |                                                   |             |       |      |             |   |      |             |   |   |             |       |   |   |        |       |  
|---------------------------------------- | ------------------------------------------------- | ----------- | ----- | ---- | ----------- | - | ---- | ----------- | - | - | ----------- | ----- | - | - | ------ | ----- | -
|                                         |                                                   |             |       |     
|                                         |                                                   | Successor   |       |      | Predecessor |  
|                                         |                                                   |             |       |      |             |  
|                                         |                                                   | Eight       |       |      | Four        |   |      |            
|                                         |                                                   | Months      |       |      | Months      |   |      | Year        |   |   | Year        |      
|                                         |                                                   | Ended       |       |      | Ended       |   |      | Ended       |   |   | Ended       |      
|                                         |                                                   | January 31, |       |      | May 31,     |   |      | January 31, |   |   | January 31, |      
|                                         |                                                   | 2004        |       |      | 2003        |   |      | 2003        |   |   | 2002        |      
|                                         |                                                   |             |       |      |             |   |      |             |   |   |             |      
|Federal taxes computed at statutory rate |                                                   | $           | (11.1 | )    |             | $ | 9.7  |             |   | $ | (25.6       | )     |   | $ | (133.6 | )    
|Increase (decrease) resulting from:      |                                                   |             |       |      |             |   |      |             |   |   |             |       |   |   |        |      
|                                         | State taxes                                       |             |       | 1.0  |             |   |      | 7.1         |   |   |             | 2.4   |   |   |        | 2.4   |  
|                                         | Tax benefit from net operating loss carryforwards |             |       |     |             |   |      |            |   |   |             | (14.3 | ) |   |        |      |  
|                                         | Foreign statutory tax rate differential           |             |       | (1.9 | )           |   |      | 2.5         |   |   |             | (0.9  | ) |   |        | 5.1   |  
|                                         | Change in foreign tax rates                       |             |       | (2.6 | )           |   |      |            |   |   |             | 1.9   |   |   |        |      |  
|                                         | Tax holidays                                      |             |       | (2.2 | )           |   |      | (0.8        | ) |   |             | (2.8  | ) |   |        | (2.4  | )
|                                         | Deductible reorganization expenses                |             |       |     |             |   |      | (21.6       | ) |   |             | (26.0 | ) |   |        |      |  
|                                         | Goodwill amortization and impairment              |             |       |     |             |   |      |            |   |   |             |      |   |   |        | 8.8   |  
|                                         | Recognition of goodwill in fresh start accounting |             |       |     |             |   |      | (67.4       | ) |   |             |      |   |   |        |      |  
|                                         | Impact of taxable merger                          |             |       |     |             |   |      | 87.5        |   |   |             |      |   |   |        |      |  
|                                         | Change in valuation allowance                     |             |       | 27.1 |             |   |      | 43.4        |   |   |             | 71.5  |   |   |        | 127.7 |  
|                                         | All other items                                   |             |       | 0.6  |             |   |      | (0.1        | ) |   |             | (2.6  | ) |   |        | 3.8   |  
|                                         |                                                   |             |       |      |             |   |      |             |   |   |             |      
|Income tax expense                       |                                                   | $           | 10.9  |      |             | $ | 60.3 |             |   | $ | 3.6         |       |   | $ | 11.8   |      
|                                         |                                                   |             |       |      |             |   |      |             |   |   |             |      

For the period ended May 31, 2003, the
recognition of goodwill in fresh start accounting listed above
refers to goodwill and the associated financial statement gain
recognized related to fresh start accounting for which no
deferred tax liability is recorded; the impact of the taxable
merger listed above refers to the recognition of gain for tax
purposes related to investment in subsidiaries. The gain
recognized for tax purposes, as a result of the taxable merger,
was fully offset by net operating loss carry forwards resulting
in zero current federal tax liability.

F-28



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Deferred tax assets (liabilities) result from
differences in the bases of assets and liabilities for tax and
financial statement purposes. The approximate tax effect of each
type of temporary difference and carryforward that gives rise to
a significant portion of the deferred tax assets and liabilities
follows (millions of dollars):

|                                          |                                                  |                                      |   |       |             |   |   |        |        |  
|----------------------------------------- | ------------------------------------------------ | ------------------------------------ | - | ----- | ----------- | - | - | ------ | ------ | -
|                                          |                                                  | Successor                            |   |       | Predecessor |  
|                                          |                                                  |                                      |   |       |             |  
|                                          |                                                  | January 31,                          |   |       | January 31, |  
|                                          |                                                  | 2004                                 |   |       | 2003        |  
|                                          |                                                  |                                      |   |       |             |  
|Deferred tax assets attributable to:      |                                                  |                                      |   |       |             |   |   |       
|                                          | Accrued liabilities                              |                                      | $ | 20.1  |             |   | $ | 50.7   |       
|                                          | Net operating loss and tax credit carry forwards |                                      |   | 32.5  |             |   |   | 329.4  |       
|                                          | Property, plant and equipment                    |                                      |   | 21.2  |             |   |   |       |       
|                                          | Pension                                          |                                      |   | 45.1  |             |   |   | 31.1   |       
|                                          | Inventory                                        |                                      |   | 0.7   |             |   |   | 11.1   |       
|                                          | Other                                            |                                      |   | 3.8   |             |   |   | 19.9   |       
|                                          |                                                  |                                      |   |       |             |  
|                                          |                                                  | Total gross deferred tax assets      |   |       | 123.4       |   |   |        | 442.2  |  
|                                          | Less valuation allowance                         |                                      |   | (57.5 | )           |   |   | (336.6 | )     
|                                          |                                                  |                                      |   |       |             |  
|                                          |                                                  | Net deferred tax assets              |   |       | 65.9        |   |   |        | 105.6  |  
|Deferred tax liabilities attributable to: |                                                  |                                      |   |       |             |   |   |       
|                                          | Property, plant and equipment                    |                                      |   | (59.4 | )           |   |   | (109.9 | )     
|                                          | Intangible assets                                |                                      |   | (80.8 | )           |   |   | (20.0  | )     
|                                          | Inter-company notes                              |                                      |   | (11.1 | )           |   |   |       |       
|                                          | Other                                            |                                      |   | (2.5  | )           |   |   | (14.0  | )     
|                                          |                                                  |                                      |   |       |             |  
|                                          |                                                  | Total gross deferred tax liabilities |   |       | (153.8      | ) |   |        | (143.9 | )
|                                          |                                                  |                                      |   |       |             |  
|                                          |                                                  | Net deferred tax liabilities         |   | $     | (87.9       | ) |   | $      | (38.3  | )
|                                          |                                                  |                                      |   |       |             |  

The Company has domestic net operating loss
carryforwards of approximately $7.0 million expiring in
2024, and foreign net operating loss carryforwards of
approximately $84.0, million, of which $22.7 million
expire in years 2008 through 2019, and $61.3 million may be
carried forward indefinitely. The carryforwards are based upon
tax returns as currently filed or as anticipated to be filed and
are subject to change based upon the Companys detailed
analysis for tax purposes. The Companys tax returns are
subject to periodic audit by the various jurisdictions in which
it operates. These audits, including those currently underway,
can result in adjustments of taxes due or adjustments of the
NOLs, which are available to offset future taxable income.

In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. The Company
expects the deferred tax assets, net of the valuation allowance,
at January 31, 2004 to be realized as a result of the
reversal of existing taxable temporary differences in the United
States and as a result of projected future taxable income and
the reversal of existing taxable temporary differences in
certain foreign locations.

As a result of managements assessment, a
valuation allowance of $57.5 million and
$336.6 million was recorded at January 31, 2004 and
January 31, 2003, respectively. As a result of the taxable
merger between the Predecessor and HLI, all tax carryforwards of
the U.S. consolidated group were reduced to zero. As such,
the gross deferred tax assets and resulting valuation allowance
was reduced by $295.6 million during the four months ended
May 31, 2003. The Company increased the valuation allowance
during the eight month period ended January 31, 2004 and
fiscal 2002 by $16.5 million and $104.0 million,
respectively. If the deferred tax

F-29



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

assets of the Company as of January 31, 2004
that have a valuation allowance recorded against them are
subsequently realized, the amount that would be allocated to
goodwill is estimated at $39.8 million.

The Company has not recorded a deferred tax
liability for temporary differences related to investments in
foreign subsidiaries that are essentially permanent in duration.
The amounts of such temporary differences as of January 31,
2004 were estimated to be $128.5 million. This amount may
become taxable upon a repatriation of assets from the
subsidiaries or a sale or liquidation of the subsidiaries. It is
not practicable to estimate the amount of unrecognized deferred
tax liability.

(11)     Bank
Borrowings, Other Notes and Long-Term Debt

Bank borrowings and other notes of the Successor
of $14.2 million at January 31, 2004 consists
primarily of short-term credit facilities of the Companys
foreign subsidiaries which bear interest at rates ranging from
5.3% to 6.1%, as well as notes payable of $1.1 million and
$10.5 million issued in conjunction with the Companys
acquisition of an additional 35% ownership interest in its
Turkish joint venture and acquisition of an aluminum wheel plant
formerly operated as part of the Companys Mexican joint
venture, respectively. (See Note (4).) Bank borrowings and
other notes of the Predecessor of $15.8 million consist
primarily of short-term notes of the Companys foreign
subsidiaries which bear interest at rates ranging from 2.25% to
10.75%, and a $2.0 million note issued in conjunction with
the purchase of the Companys Wheland foundry which was
repaid on March 7, 2003.

Long-term debt consists of the following
(millions of dollars):

|                                                                                                                                                       |  |             |       |  |             |   |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ----- |  | ----------- | - | ------- | 
|                                                                                                                                                       |  | Successor   |       |  | Predecessor |  
|                                                                                                                                                       |  |             |       |  |             |  
|                                                                                                                                                       |  | January 31, |       |  | January 31, |  
|                                                                                                                                                       |  | 2004        |       |  | 2003        |  
|                                                                                                                                                       |  |             |       |  |             |  
|DIP Facility                                                                                                                                           |  | $           |      |  |             | $ | 49.9    | 
|Bank term loan facility maturing February 3,
    2005, weighted average interest rate of 8.4% at January 31,
    2003                                  |  |             |      |  |             |   | 176.8   | 
|Bank revolving credit facility maturing through
    2006, weighted average interest rate of 6.9% at January 31,
    2003                               |  |             |      |  |             |   | 573.8   | 
|Various foreign bank and government loans
    maturing through 2006, weighted average interest rates of 5.7%
    and 6.1% at January 31, 2004 and 2003 |  |             | 28.7  |  |             |   | 91.3    | 
|8 1/4% Senior Subordinated Notes due 2008                                                                                                              |  |             |      |  |             |   | 224.3   | 
|9 1/8% Senior Subordinated Notes due
    2007                                                                                                          |  |             |      |  |             |   | 389.1   | 
|11% Senior Subordinated Notes due 2006                                                                                                                 |  |             |      |  |             |   | 239.4   | 
|11 7/8% Senior Notes due 2006                                                                                                                          |  |             |      |  |             |   | 300.0   | 
|New Term Loan maturing 2009, weighted average
    interest rate of 5.0% at January 31, 2004                                                            |  |             | 447.8 |  |             |   |        | 
|10 1/2% New Senior Notes, net of discount,
    due 2010                                                                                                |  |             | 248.6 |  |             |   |        | 
|Mortgage note payable                                                                                                                                  |  |             | 22.5  |  |             |   |        | 
|Capital lease obligations                                                                                                                              |  |             | 16.2  |  |             |   | 10.7    | 
|                                                                                                                                                       |  |             |       |  |             |  
|                                                                                                                                                       |  |             | 763.8 |  |             |   | 2,055.3 | 

F-30



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                               |                |             |      |       |             |  |         |      | 
|---------------------------------------------- | -------------- | ----------- | ---- | ----- | ----------- |  | ------- | ---- | 
|                                               |                | Successor   |      |       | Predecessor | 
|                                               |                |             |      |       |             | 
|                                               |                | January 31, |      |       | January 31, | 
|                                               |                | 2004        |      |       | 2003        | 
|                                               |                |             |      |       |             | 
|Less current portion of long-term debt         |                |             | 11.3 |       |             |  |        |     
|Less current portion of DIP facility           |                |             |     |       |             |  | 49.9    |     
|Less current portion not subject to compromise |                |             |     |       |             |  | 40.1    |     
|Less liabilities subject to compromise         |                |             |     |       |             |  | 1,903.4 |     
|                                               |                |             |      |       |             | 
|                                               | Long-term debt |             | $    | 752.5 |             |  | $       | 61.9 | 
|                                               |                |             |      |       |             | 

As discussed in Note (1), the Debtors emerged
from Chapter 11 on June 3, 2003. In connection with
the Debtors emergence on the Effective Date, HLI entered
into a $550.0 million senior secured credit facility, which
was subsequently amended on October 16, 2003 by amendment
No. 1 and Waiver to Credit Agreement to, among other
things, reduce the interest rate on the term loan portion of the
senior secured credit facility by 100 basis points, (as
amended, the New Credit Facility). The New Credit
Facility consists of a $450.0 million six-year amortizing
term loan (the New Term Loan) and a five-year
$100.0 million revolving credit facility (the
Revolving Credit Facility). In addition, HLI issued
on the Effective Date an aggregate of $250.0 million
principal amount of 10 1/2% senior notes due 2010 (the
New Senior Notes). The proceeds from the initial
$450.0 million of borrowings under the New Credit Facility
and the net proceeds from the New Senior Notes were used to make
payments required under the Plan of Reorganization, including
the repayment of the Companys DIP Facility and a payment
of $477.3 million to certain prepetition lenders, to pay
related transaction costs and to refinance certain debt.



| |                    
| | -------------------
| | New Credit Facility

The Term Loan Facility was made available to HLI
in a single drawing on the Effective Date, payable in quarterly
installments equal to 0.25% of the principal amount outstanding
immediately following effectiveness of the Plan of
Reorganization with the remaining balance payable on the sixth
anniversary of the Effective Date. The Company paid quarterly
installments of $1.1 million each on October 31, 2003
and January 30, 2004. Subsequent to January 31, 2004,
the Company pre-paid $16.0 million outstanding under the
Term Loan Facility on February 12, 2004 with the proceeds
of a primary offering of the Companys common stock. (See
Note (20).) The Revolving Credit Facility will be available
until the fifth anniversary of the Effective Date, on which date
all loans outstanding under the Revolving Credit Facility will
become due and payable.

The interest rates per annum under the New Credit
Facility will, at HLIs option, be: (A) for the Term
Loan, either the LIBOR rate plus 3.75% or the alternate base
rate plus 2.75%; and (B) for the Revolving Credit Facility:
(i) for the first two fiscal quarters after the closing
date of the New Credit Facility, either the LIBOR rate plus
3.50% or the alternate base rate plus 2.50%, and
(ii) thereafter, such higher or lower rates determined by
reference to the Companys leverage ratio.

The New Credit Facility contains covenants
restricting the Companys ability and the ability of its
subsidiaries to issue more debt, pay dividends, repurchase
stock, make investments, merge or consolidate, transfer assets
and enter into transactions with affiliates. These restrictive
covenants are customary for such facilities and subject to
certain exceptions. The New Credit Facility also contains
certain financial covenants regarding a maximum total leverage
ratio, a minimum interest coverage ratio and a minimum fixed
charge coverage ratio. HLIs obligations under the New
Credit Facility are guaranteed by the Company and all of its
material direct and indirect domestic subsidiaries.

As of January 31, 2004, there were no
outstanding borrowings and approximately $22.5 million in
letters of credit issued under the Revolving Credit Facility.
The amount available to borrow under the Revolving Credit
Facility at January 31, 2004 was approximately
$77.5 million.

F-31



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                 
| | ----------------
| | New Senior Notes

HLI issued $250.0 million aggregate
principal amount of New Senior Notes on June 3, 2003. The
New Senior Notes will mature on June 15, 2010. Interest on
the New Senior Notes will accrue at a rate of
10 1/2% per annum and will be payable semi-annually in
arrears on June 15 and December 15. On
October 30, 2003, HLI commenced its offer to exchange up to
$250,000,000 aggregate principal amount of outstanding
10 1/2% Senior Notes due 2010 of HLI for a like
principal amount of 10 1/2% Senior Notes due 2010 of
HLI. The exchange offer was registered under the Securities Act
of 1933, as amended, to satisfy HLIs obligations under the
registration rights agreement entered into by HLI and the
initial purchasers of the New Senior Notes. On November 28,
2003, HLI completed its exchange offer. All of the $250,000,000
aggregate principal amount of the outstanding New Senior Notes
were tendered and accepted for exchange.

The New Senior Notes are senior, unsecured
obligations of HLI and are effectively subordinated in right of
payment to all existing and future secured debt of HLI to the
extent of the value of the assets securing that debt, equal in
right of payment with all existing and future senior debt of
HLI, senior in right of payment to all subordinated debt of HLI.

Except as set forth below, the New Senior Notes
will not be redeemable at the option of HLI prior to
June 15, 2007. Starting on that date, HLI may redeem all or
any portion of the New Senior Notes, at once or over time, upon
the terms and conditions set forth in the senior note indenture
agreement (the Indenture). At any time prior to
June 15, 2007, HLI may redeem all or any portion of the New
Senior Notes, at once or over time, at a redemption price equal
to 100% of the principal amount of the New Senior Notes to be
redeemed, plus a specified make-whole premium. In
addition, at any time and from time to time prior to
June 15, 2006, HLI may redeem up to a maximum of 35% of the
aggregate principal amount of the New Senior Notes with the
proceeds of one or more public equity offerings at a redemption
price equal to 110.50% of the principal amount thereof, plus
accrued and unpaid interest. Subsequent to January 31,
2004, the Company redeemed $87.5 million aggregate
principal amount of the New Senior Notes on March 12, 2004
with the proceeds of a primary offering of the Companys
common stock. (See Note (20).) In connection with this
redemption, the Company will record an approximate
$11.8 million loss on early extinguishment of debt,
including recognition of deferred debt issuance costs and
original issue discount on the redeemed amount, in the first
quarter of fiscal 2004.

The Indenture provides for certain restrictions
regarding additional debt, dividends and other distributions,
additional stock of subsidiaries, certain investments, liens,
transactions with affiliates, mergers, consolidations, and the
transfer and sales of assets. The Indenture also provides that a
holder of the New Senior Notes may, under certain circumstances,
have the right to require that the Company repurchase such
holders New Senior Notes upon a change of control of the
Company. The New Senior Notes are unconditionally guaranteed as
to the payment of principal, premium, if any, and interest,
jointly and severally on a senior, unsecured basis by the
Company and substantially all of its domestic subsidiaries (see
Note (21)).



| |                
| | ---------------
| | Other Financing

In addition to the New Credit Facility and New
Senior Notes as described above, the Company had other debt
financing of $67.4 million as of January 31, 2004.
These included borrowings under various foreign debt facilities
in an aggregate amount of $28.7 million, capital lease
obligations of $16.2 million and a mortgage note payable of
$22.5 million.

As of January 31, 2004, there were
$2.5 million in outstanding borrowings under various
foreign bank credit facilities. A portion of those credit
facilities require compensating balance arrangements. In
addition, the Company maintains cash deposits at certain
locations in order to assure the continuation of vendor trade

F-32



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

terms. As of January 31, 2004, the total
amount of cash deposits maintained for these purposes was
approximately $5.0 million.



| |                 
| | ----------------
| | Reclassification

Effective February 1, 2003, the Company
reclassified an extraordinary gain on extinguishment of debt of
$2.7 million, net of tax of $1.5 million, realized
during the year ended January 31, 2002 to gain on
extinguishment of debt upon the adoption of Statement of
Financial Accounting Standards No. 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections as of
April 2002.



|     |                                  
|---- | ---------------------------------
|(12) | Liabilities Subject to Compromise

The principal categories of claims that were
classified as liabilities subject to compromise under the
reorganization proceedings are identified below.



| |                     
| | --------------------
| | Recorded Liabilities

Prior to emergence, on a consolidated basis,
recorded liabilities subject to compromise under the
Chapter 11 proceedings consisted of the following (millions
of dollars):

|                                                                |                    |             |       |         |             |   |       |         |         | 
|--------------------------------------------------------------- | ------------------ | ----------- | ----- | ------- | ----------- | - | ----- | ------- | ------- | 
|                                                                |                    |            
|                                                                |                    | Predecessor |      
|                                                                |                    |             |      
|                                                                |                    | May 31,     |       |         | January 31, |  
|                                                                |                    | 2003        |       |         | 2003        |  
|                                                                |                    |             |       |         |             |  
|Accounts payable and accrued liabilities,
    principally trade |                    | $           | 155.8 |         |             | $ | 152.1 |        
|Credit Agreement:                                               |                    |             |       |         |             |   |       |        
|                                                                | Term loans         |             |       | 176.8   |             |   |       | 176.8   |        
|                                                                | Revolving facility |             |       | 573.8   |             |   |       | 573.8   |        
|                                                                | Accrued interest   |             |       | 45.2    |             |   |       | 29.3    |        
|Senior Notes and Senior Subordinated Notes:                     |                    |             |       |         |             |   |       |        
|                                                                | Face value         |             |       | 1,152.8 |             |   |       | 1,152.8 |        
|                                                                | Accrued interest   |             |       | 49.0    |             |   |       | 49.0    |        
|                                                                |                    |             |       |         |             |  
|                                                                |                    | Total       |       | $       | 2,153.4     |   |       | $       | 2,133.8 | 
|                                                                |                    |             |       |         |             |  

Of the liabilities subject to compromise at
May 31, 2003, $1,076.7 million were written off as a
gain on discharge of debt in fresh start accounting. (See Note
(3).)

The Bankruptcy Code generally disallows the
payment of interest that would otherwise accrue postpetition
with respect to unsecured or undersecured claims. The Company
continued to record interest expense accruing postpetition with
respect to the Companys Third Amended and Restated Credit
Agreement dated as of February 3, 1999 (the
Prepetition Credit Agreement) because a significant
portion of such accrued interest would be an allowed claim as
part of the Plan of Reorganization. The amount of such unpaid
interest recorded as of May 31, 2003 was
$45.2 million, net of the May payment noted below, and was
classified as a liability subject to compromise in the
consolidated balance sheet as of that date.

The DIP Facility provided for the postpetition
cash payment at certain intervals of interest and fees accruing
postpetition under the Companys Prepetition Credit
Agreement, if certain tests are satisfied relating to the
liquidity position and earnings of the Company and its
subsidiaries, and the repatriation of funds from foreign
subsidiaries. On May 1, 2003, a payment of
$1.2 million was made for a portion of accrued interest and
fees with respect to this provision.

F-33



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company did not continue to record interest
expense accruing postpetition with respect to the Old Senior
Notes and the Companys 11% Senior Subordinated Notes
due 2006, 9 1/8% Senior Subordinated Notes due 2007,
and 8 1/4% Senior Subordinated Notes due 2008 (the
Old Senior Subordinated Notes) because such interest
would not be an allowed claim as part of the Plan of
Reorganization. The amount of such interest accruing
postpetition that had not been recorded as of May 31, 2003
and January 31, 2003 was $174.9 million and
$136.3 million, respectively. The recorded amount of
prepetition accrued interest was $49.0 million, which was
classified as a liability subject to compromise in the
consolidated balance sheets as of May 31, 2003 and
January 31, 2003.



| |                       
| | ----------------------
| | Contingent Liabilities

Contingent liabilities of the Debtors as of the
Chapter 11 Filing date are also subject to compromise. The
Company is a party to litigation matters and claims that are
normal in the course of its operations. Generally, litigation
related to claims, as defined by the Bankruptcy
Code, is stayed. Also, as a normal part of their operations, the
Companys subsidiaries undertake certain contractual
obligations, warranties and guarantees in connection with the
sale of products or services. Resolution of these matters cannot
be predicted with certainty.



|     |                                                                  
|---- | -----------------------------------------------------------------
|(13) | Pension Plans and Postretirement Benefits
    Other Than Pensions

The Company sponsors several defined benefit
pension plans (Pension Benefits) and health care and
life insurance benefits (Other Benefits) for certain
employees around the world. The Company funds the Pension
Benefits based upon the funding requirements of United States
Federal and international laws and regulations in advance of
benefit payments and the Other Benefits as benefits are provided
to the employees.

The following tables provide a reconciliation of
the change in benefit obligation, the change in plan assets and
the net amount recognized in the consolidated balance sheets as
of January 31 (based on an October 31 measurement
date, in millions of dollars):

|                                                            |                                   |                      |       |       |                     |   |       |                  |  |   |       |       |  |      |       |       |      |   |       |       |  |   |       |       | 
|----------------------------------------------------------- | --------------------------------- | -------------------- | ----- | ----- | ------------------- | - | ----- | ---------------- |  | - | ----- | ----- |  | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                            |                                   |                      |       |      
|                                                            |                                   | North American Plans |       |       | International Plans |  
|                                                            |                                   |                      |       |       |                     |  
|                                                            |                                   |                      |       |       |                     |  
|                                                            |                                   | Pension Benefits     |       |       | Other Benefits      |   |       | Pension Benefits | 
|                                                            |                                   |                      |       |       |                     |   |       |                  | 
|                                                            |                                   | 2004                 |       |       | 2003                |   |       | 2004             |  |   | 2003  |       |  | 2004 |       |       | 2003 |  
|                                                            |                                   |                      |       |       |                     |   |       |                  |  |   |       |       |  |      |       |       |      |  
|Change in Benefit Obligation:                               |                                   |                      |       |       |                     |   |       |                  |  |   |       |       |  |      |       |       |      |   |       |       |  |   |       |      
|Benefit obligation at beginning of year                     |                                   | $                    | 183.4 |       |                     | $ | 173.8 |                  |  | $ | 186.2 |       |  | $    | 150.2 |       |      | $ | 135.8 |       |  | $ | 114.2 |      
|Service cost                                                |                                   |                      | 0.2   |       |                     |   | 0.2   |                  |  |   | 0.1   |       |  |      | 0.2   |       |      |   | 0.6   |       |  |   | 1.6   |      
|Interest cost                                               |                                   |                      | 11.2  |       |                     |   | 11.7  |                  |  |   | 11.8  |       |  |      | 10.0  |       |      |   | 7.2   |       |  |   | 6.1   |      
|Amendments                                                  |                                   |                      | (0.6  | )     |                     |   |      |                  |  |   |      |       |  |      |      |       |      |   |      |       |  |   |      |      
|Transfers to defined contribution plan                      |                                   |                      |      |       |                     |   |      |                  |  |   |      |       |  |      |      |       |      |   | (3.6  | )     |  |   |      |      
|Discharge of obligation under Plan of
    Reorganization(1) |                                   |                      | (6.8  | )     |                     |   |      |                  |  |   |      |       |  |      |      |       |      |   |      |       |  |   |      |      
|Special termination benefits                                |                                   |                      |      |       |                     |   | 2.4   |                  |  |   |      |       |  |      | 1.0   |       |      |   |      |       |  |   |      |      
|Actuarial loss (gain)                                       |                                   |                      | 14.1  |       |                     |   | 12.0  |                  |  |   | 6.1   |       |  |      | 41.9  |       |      |   | (1.8  | )     |  |   | (2.3  | )    
|Benefits paid                                               |                                   |                      | (14.7 | )     |                     |   | (16.7 | )                |  |   | (13.3 | )     |  |      | (17.1 | )     |      |   | (9.1  | )     |  |   | (6.3  | )    
|                                                            |                                   |                      |       |       |                     |   |       |                  |  |   |       |       |  |      |       |       |      |  
|                                                            | Benefit obligation at end of year |                      | $     | 186.8 |                     |   | $     | 183.4            |  |   | $     | 190.9 |  |      | $     | 186.2 |      |   | $     | 129.1 |  |   | $     | 113.3 | 
|                                                            |                                   |                      |       |       |                     |   |       |                  |  |   |       |       |  |      |       |       |      |  

F-34



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |   |        |        |     |   |        |        |     | 
|-------------------------------------------------------- | --------------------- | ---------------------------------------- | ----- | ----- | ------------------- | - | ----- | ---------------- | ----- | - | ------ | ------ | - | ---- | ------ | ----- | ---- | - | ------ | ------ | --- | - | ------ | ------ | --- | 
|                                                         |                       |                                          |       |      
|                                                         |                       | North American Plans                     |       |       | International Plans |  
|                                                         |                       |                                          |       |       |                     |  
|                                                         |                       |                                          |       |       |                     |  
|                                                         |                       | Pension Benefits                         |       |       | Other Benefits      |   |       | Pension Benefits |      
|                                                         |                       |                                          |       |       |                     |   |       |                  |      
|                                                         |                       | 2004                                     |       |       | 2003                |   |       | 2004             |       |   | 2003   |        |   | 2004 |        |       | 2003 |  
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  
|Change in Plan Assets:                                   |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |   |        |        |     |   |        |       
|Fair value of plan assets at beginning of year           |                       | $                                        | 121.3 |       |                     | $ | 140.1 |                  |       | $ |       |        |   | $    |       |       |      | $ | 3.3    |        |     | $ | 1.8    |       
|Actual return on plan assets                             |                       |                                          | 16.6  |       |                     |   | (3.0  | )                |       |   |       |        |   |      |       |       |      |   | (0.7   | )      |     |   | 0.1    |       
|Company contributions                                    |                       |                                          | 4.0   |       |                     |   | 1.1   |                  |       |   |       |        |   |      |       |       |      |   | 5.0    |        |     |   | 0.8    |       
|Benefits paid and plan expenses                          |                       |                                          | (14.9 | )     |                     |   | (16.9 | )                |       |   |       |        |   |      |       |       |      |   |       |        |     |   |       |       
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  
|                                                         |                       | Fair value of plan assets at end of year |       | $     | 127.0               |   |       | $                | 121.3 |   |        | $      |  |      |        | $     |     |   |        | $      | 7.6 |   |        | $      | 2.7 | 
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  
|Funded Status:                                           |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |   |        |        |     |   |        |       
|Funded status of plan                                    |                       | $                                        | (59.8 | )     |                     | $ | (62.1 | )                |       | $ | (190.9 | )      |   | $    | (186.2 | )     |      | $ | (121.5 | )      |     | $ | (110.6 | )     
|Unrecognized net actuarial (gain) loss                   |                       |                                          | (17.8 | )     |                     |   | 52.0  |                  |       |   | (21.5  | )      |   |      | 89.2   |       |      |   | (2.6   | )      |     |   | 14.0   |       
|Unrecognized prior service cost                          |                       |                                          |      |       |                     |   | 2.7   |                  |       |   |       |        |   |      | 4.5    |       |      |   |       |        |     |   | 0.8    |       
|Intangible asset                                         |                       |                                          |      |       |                     |   | (2.7  | )                |       |   |       |        |   |      |       |       |      |   |       |        |     |   | (0.8   | )     
|Adjustment to recognize additional minimum
    liability |                       |                                          |      |       |                     |   | (51.4 | )                |       |   |       |        |   |      |       |       |      |   |       |        |     |   | (11.4  | )     
|Employer contributions                                   |                       |                                          |      |       |                     |   |      |                  |       |   | 4.9    |        |   |      | 1.8    |       |      |   |       |        |     |   |       |       
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  
|                                                         | Accrued benefit cost  |                                          | $     | (77.6 | )                   |   | $     | (61.5            | )     |   | $      | (207.5 | ) |      | $      | (90.7 | )    |   | $      | (124.1 | )   |   | $      | (108.0 | )  
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  
|Amount recognized in Consolidated
    Balance Sheet:     |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |   |        |        |     |   |        |       
|Accrued benefit cost                                     |                       | $                                        | (77.6 | )     |                     | $ | (7.4  | )                |       | $ | (207.5 | )      |   | $    | (90.7  | )     |      | $ | (124.1 | )      |     | $ | (95.8  | )     
|Intangible asset                                         |                       |                                          |      |       |                     |   | (2.7  | )                |       |   |       |        |   |      |       |       |      |   |       |        |     |   | (0.8   | )     
|Accumulated other comprehensive loss                     |                       |                                          |      |       |                     |   | (51.4 | )                |       |   |       |        |   |      |       |       |      |   |       |        |     |   | (11.4  | )     
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  
|                                                         | Net amount recognized |                                          | $     | (77.6 | )                   |   | $     | (61.5            | )     |   | $      | (207.5 | ) |      | $      | (90.7 | )    |   | $      | (124.1 | )   |   | $      | (108.0 | )  
|                                                         |                       |                                          |       |       |                     |   |       |                  |       |   |        |        |   |      |        |       |      |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Of the net amount recognized for North American
    pension benefits at January 31, 2003, approximately
    $6.8 million relates to supplemental executive retirement
    benefits and has been classified as a liability subject to
    compromise in the accompanying consolidated balance sheet as of
    January 31, 2003. This liability was discharged under the
    confirmed Plan of Reorganization upon emergence.

In accordance with the fresh start accounting
provisions of SOP 90-7, all previously unrecognized gains
or losses were immediately recognized at the emergence date.

F-35



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The projected benefit obligation, accumulated
projected benefit obligation (APBO) and fair value
of plan assets for the benefit plans with accumulated benefit
obligations in excess of plan assets for the North American
plans were $186.8 million, $190.9 million and
$127.0 million, respectively, as of January 31, 2004,
and $183.4 million, $186.2 million and
$121.3 million, respectively, as of January 31, 2003.
The components of net periodic benefit costs included in
operating results are as follows (millions of dollars):

|                                                      |                  |                      |      |     |                |   |      |             |  |       |             |     |      |             |       |     |         |   |     |             |  |   |             |     |  |   |      |      |  |   |     |     | 
|----------------------------------------------------- | ---------------- | -------------------- | ---- | --- | -------------- | - | ---- | ----------- |  | ----- | ----------- | --- | ---- | ----------- | ----- | --- | ------- | - | --- | ----------- |  | - | ----------- | --- |  | - | ---- | ---- |  | - | --- | --- | 
|                                                      |                  |                     
|                                                      |                  | North American Plans |     
|                                                      |                  |                      |     
|                                                      |                  |                      |      |    
|                                                      |                  | Pension Benefits     |      |     | Other Benefits |  
|                                                      |                  |                      |      |     |                |  
|                                                      |                  |                      |      |     |                |   |      |            
|                                                      |                  | Successor            |      |     | Predecessor    |   |      | Successor   |  |       | Predecessor |    
|                                                      |                  |                      |      |     |                |   |      |             |  |       |             |    
|                                                      |                  | Eight                |      |     | Four           |   |      |             |  | Eight |             |     | Four |             |       |    
|                                                      |                  | Months               |      |     | Months         |   |      | Year        |  |       | Year        |     |      | Months      |       |     | Months  |   |     | Year        |  |   | Year        |    
|                                                      |                  | Ended                |      |     | Ended          |   |      | Ended       |  |       | Ended       |     |      | Ended       |       |     | Ended   |   |     | Ended       |  |   | Ended       |    
|                                                      |                  | January 31,          |      |     | May 31,        |   |      | January 31, |  |       | January 31, |     |      | January 31, |       |     | May 31, |   |     | January 31, |  |   | January 31, |    
|                                                      |                  | 2004                 |      |     | 2003           |   |      | 2003        |  |       | 2002        |     |      | 2004        |       |     | 2003    |   |     | 2003        |  |   | 2002        |    
|                                                      |                  |                      |      |     |                |   |      |             |  |       |             |     |      |             |       |     |         |   |     |             |  |   |             |    
|Components of net periodic benefit cost
    (income): |                  |                      |      |     |                |   |      |             |  |       |             |     |      |             |       |     |         |   |     |             |  |   |             |     |  |   |      |      |  |   |     |    
|Service cost                                          |                  | $                    | 0.3  |     |                | $ | 0.1  |             |  | $     | 0.5         |     |      | $           | 0.4   |     |         | $ | 0.1 |             |  | $ |            |     |  | $ | 0.2  |      |  | $ | 0.1 |    
|Interest cost                                         |                  |                      | 7.4  |     |                |   | 3.8  |             |  |       | 11.7        |     |      |             | 11.4  |     |         |   | 7.8 |             |  |   | 4.0         |     |  |   | 10.0 |      |  |   | 7.8 |    
|Expected return on plan assets                        |                  |                      | (6.0 | )   |                |   | (3.0 | )           |  |       | (12.0       | )   |      |             | (14.7 | )   |         |   |    |             |  |   |            |     |  |   |     |      |  |   |    |    
|Net amortization and deferral                         |                  |                      |     |     |                |   | 1.0  |             |  |       | 1.3         |     |      |             | 3.3   |     |         |   |    |             |  |   | 2.1         |     |  |   | 3.6  |      |  |   | 0.2 |    
|Special termination benefit recognition               |                  |                      |     |     |                |   |     |             |  |       | 2.4         |     |      |             | 3.8   |     |         |   |    |             |  |   |            |     |  |   | 1.0  |      |  |   | 0.1 |    
|                                                      |                  |                      |      |     |                |   |      |             |  |       |             |     |      |             |       |     |         |   |     |             |  |   |             |    
|                                                      | Net benefit cost |                      | $    | 1.7 |                |   | $    | 1.9         |  |       | $           | 3.9 |      |             | $     | 4.2 |         |   | $   | 7.9         |  |   | $           | 6.1 |  |   | $    | 14.8 |  |   | $   | 8.2 | 
|                                                      |                  |                      |      |     |                |   |      |             |  |       |             |     |      |             |       |     |         |   |     |             |  |   |             |    

|                                                      |                  |                     |      |     |             |   |      |             |  |   |             |     |  |   |      |     | 
|----------------------------------------------------- | ---------------- | ------------------- | ---- | --- | ----------- | - | ---- | ----------- |  | - | ----------- | --- |  | - | ---- | --- | 
|                                                      |                  |                    
|                                                      |                  | International Plans |     
|                                                      |                  |                     |     
|                                                      |                  |                    
|                                                      |                  | Pension Benefits    |     
|                                                      |                  |                     |     
|                                                      |                  |                     |      |    
|                                                      |                  | Successor           |      |     | Predecessor |  
|                                                      |                  |                     |      |     |             |  
|                                                      |                  | Eight               |      |     | Four        |   |      |            
|                                                      |                  | Months              |      |     | Months      |   |      | Year        |  |   | Year        |    
|                                                      |                  | Ended               |      |     | Ended       |   |      | Ended       |  |   | Ended       |    
|                                                      |                  | January 31,         |      |     | May 31,     |   |      | January 31, |  |   | January 31, |    
|                                                      |                  | 2004                |      |     | 2003        |   |      | 2003        |  |   | 2002        |    
|                                                      |                  |                     |      |     |             |   |      |             |  |   |             |    
|Components of net periodic benefit cost
    (income): |                  |                     |      |     |             |   |      |             |  |   |             |     |  |   |      |    
|Service cost                                          |                  | $                   | 0.2  |     |             | $ | 0.1  |             |  | $ | 0.5         |     |  | $ | 0.7  |    
|Interest cost                                         |                  |                     | 4.5  |     |             |   | 2.2  |             |  |   | 6.0         |     |  |   | 5.1  |    
|Expected return on plan assets                        |                  |                     | (0.1 | )   |             |   | (0.1 | )           |  |   | (0.1        | )   |  |   | (0.1 | )  
|Net amortization and deferral                         |                  |                     |     |     |             |   | 0.2  |             |  |   | 0.3         |     |  |   | 0.3  |    
|                                                      |                  |                     |      |     |             |   |      |             |  |   |             |    
|                                                      | Net benefit cost |                     | $    | 4.6 |             |   | $    | 2.4         |  |   | $           | 6.7 |  |   | $    | 6.0 | 
|                                                      |                  |                     |      |     |             |   |      |             |  |   |             |    

On January 31, 2002, the Company modified
the North American defined benefit plan to comply with recent
legislation and to freeze final average compensation.

F-36



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The actuarial assumptions used in determining the
funded status information and net periodic benefit cost
information shown above were as follows:

|                               |  |                      |      |   |                     |  |      |                  |  |  |      |   |  |      |      |   |      |  |      |   |  |  |      |  
|------------------------------ |  | -------------------- | ---- | - | ------------------- |  | ---- | ---------------- |  |  | ---- | - |  | ---- | ---- | - | ---- |  | ---- | - |  |  | ---- | -
|                               |  |                      |      |  
|                               |  | North American Plans |      |   | International Plans | 
|                               |  |                      |      |   |                     | 
|                               |  |                      |      |   |                     | 
|                               |  | Pension Benefits     |      |   | Other Benefits      |  |      | Pension Benefits | 
|                               |  |                      |      |   |                     |  |      |                  | 
|                               |  | 2004                 |      |   | 2003                |  |      | 2004             |  |  | 2003 |   |  | 2004 |      |   | 2003 | 
|                               |  |                      |      |   |                     |  |      |                  |  |  |      |   |  |      |      |   |      | 
|Weighted average assumptions:  |  |                      |      |   |                     |  |      |                  |  |  |      |   |  |      |      |   |      |  |      |   |  |  |      |  
|Discount rate                  |  |                      | 6.25 | % |                     |  | 6.75 | %                |  |  | 6.25 | % |  |      | 6.75 | % |      |  | 5.50 | % |  |  | 5.50 | %
|Expected return on plan assets |  |                      | 8.00 | % |                     |  | 8.00 | %                |  |  | N/A  |   |  |      | N/A  |   |      |  | 5.00 | % |  |  | 5.00 | %
|Rate of compensation increase  |  |                      | N/A  |   |                     |  | 4.75 | %                |  |  | N/A  |   |  |      | N/A  |   |      |  | 2.10 | % |  |  | 2.10 | %

At January 31, 2004, the assumed annual
health care cost trend rate used in measuring the APBO
approximated 11.5% declining to 5.0% in years 2008 and
thereafter. Increasing the assumed cost trend rate by 1% each
year would have increased the APBO and service and interest cost
components by approximately $17.4 million and
$0.8 million, respectively, for fiscal 2003. Decreasing the
assumed cost trend rate by 1% each year would have decreased the
APBO and service/interest cost components by approximately
$14.9 million and $0.6 million, respectively, for
fiscal 2003.



| |                          
| | -------------------------
| | Expected Return on Assets

To develop the expected long-term rate of return
on assets assumption, the Company considered the historical
returns and the future expectations for returns for each asset
class, as well as the target asset allocation of the pension
portfolio. This resulted in the selection of the 8.00% long-term
rate of return on assets assumption for the North American plans.



| |                             
| | ----------------------------
| | North American Contributions

During fiscal 2004, the Company expects to make
contributions to its North American pension plans and health
care and life insurance benefit plans of $13.2 million and
$15.2 million, respectively.



| |                                  
| | ---------------------------------
| | Pension Benefit Asset Information

The Companys North American pension
plans weighted-average pension asset allocation at
December 31, 2003, and 2002, by asset category are as
follows:

|                     |       |      |      |     |      |  |      |     |  
|-------------------- | ----- | ---- | ---- | --- | ---- |  | ---- | --- | -
|                     |       | 2003 |      |     | 2002 | 
|                     |       |      |      |     |      | 
|Asset Category:      |       |      |      |     |      |  |      |    
|Domestic Equity      |       |      | 52.5 | %   |      |  | 43.7 | %  
|International Equity |       |      | 15.7 | %   |      |  | 11.3 | %  
|Fixed Income         |       |      | 31.8 | %   |      |  | 45.0 | %  
|                     |       |      |      |     |      | 
|                     | Total |      |      | 100 | %    |  |      | 100 | %
|                     |       |      |      |     |      | 

In addition to the broad asset allocation
described above, the following policies apply to individual
asset classes:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fixed income investments are oriented toward risk
    averse, investment grade securities. With the exception of
    U.S. Government securities, in which the plan may invest
    the entire fixed income allocation, fixed income investments are
    required to be diversified among individual securities and
    sectors. There is no limit on the maximum maturity of securities
    held. Short sales, margin purchases and similar speculative
    transactions are prohibited.

F-37



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Equity investments are diversified among
    capitalization and style, and are required to be diversified
    among industries and economic sectors. Limitations are placed on
    the overall allocation to any individual security. Short sales,
    margin purchases and similar speculative transactions are
    prohibited.

The Board of Directors has established the
Employee Benefits Committee (the Committee) to manage the
operations and administration of all benefit plans and related
trusts. The Committee has an investment policy for the Pension
Plan assets that establishes target asset allocations for the
above listed asset classes as follows:

|                     |  |               |     |  |              |  |        | 
|-------------------- |  | ------------- | --- |  | ------------ |  | ------ | 
|                     |  | Policy Target |     |  | Policy Range | 
|                     |  |               |     |  |              | 
|Asset Class:         |  |               |     |  |              |  |        | 
|Domestic Equity      |  |               | 55% |  |              |  | 35-75% | 
|International Equity |  |               | 15% |  |              |  | 10-20% | 
|Fixed Income         |  |               | 30% |  |              |  | 25-35% | 
|Real Estate          |  |               | 0%  |  |              |  | 0-0%   | 

The asset allocation policy was developed with
consideration to the long-term nature of the obligations and the
following investment objectives: achieving a return on assets
consistent with the funding requirements of the plan, maximizing
portfolio return, and minimizing the impact of market
fluctuations on the value of the plan assets. The Committee is
committed to diversification to reduce the risk of large losses.
To that end, the Committee has adopted policies requiring that
each asset class will be diversified, and multiple managers with
differing styles of management will be employed. On a quarterly
basis, the Committee reviews progress towards achieving the
Pension Plans and individual managers performance
objectives.



| |                                                                  
| | -----------------------------------------------------------------
| | Medicare Prescription Drug, Improvement
    and Modernization Act

On December 8, 2003, President George W.
Bush signed the Medicare Prescription Drug, Improvement and
Modernization Act (the Act) into law. This law introduces a
prescription drug benefit under Medicare as well as a federal
subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to the
benefit established by the law.

In January 2004, the Financial Accounting
Standards Board (FASB) issued FASB Staff Position
No. FAS 106-1, Accounting and Disclosure
Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003
(FSP 106-1). FSP 106-1 permits companies that are a
sponsor of a postretirement heath care plan that provides a
prescription drug benefit to either include the effects of the
Act in its financial statements or defer accounting for the Act
until the FASB issues guidance on how to account for the federal
subsidy. The company has elected to defer accounting for the
effects of the Act until specific guidance is issued by the FASB.

As such, the accumulated postretirement benefit
obligation (APBO) and the net periodic postretirement
benefit cost do not reflect the effects of the Act. Future
guidance on the accounting for the federal subsidy is pending
and that guidance, when issued, could require changes to
previously reported information. The Company is unable to
estimate the impact the Act will have on its financial
statements or the amount of cash it may be entitled to receive
from any federal subsidy, but believes that its plan is at least
actuarially equivalent. As such, the Act is expected to
favorably impact the Company by reducing the post retirement
benefit obligation and expense in future periods when compared
to 2003.



| |               
| | --------------
| | Other Benefits

The Company also has contributory employee
retirement savings plans covering substantially all of its
domestic employees. The employer contribution is determined at
the discretion of the Company and totaled approximately
$9.4 million, $7.2 million, $16.8 million and
$16.9 million for the eight months ended

F-38



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

January 31, 2004, the four months ended
May 31, 2003, and the years ended January 31, 2003 and
2002, respectively.



|     |                                                      
|---- | -----------------------------------------------------
|(14) | Asset Impairments and Other Restructuring
    Charges

The Company recorded asset impairment losses and
other restructuring charges of $28.9 million in the eight
months ended January 31, 2004, $6.4 million in the
four months ended May 31, 2004, $43.5 million in
fiscal year 2002, and $141.6 million in fiscal 2001.

Asset impairments and other restructuring charges
by segment are as follows:

|                                               |       |                                     |      |      |            |   |     |       |  |       |   |   |  |   |      |      | 
|---------------------------------------------- | ----- | ----------------------------------- | ---- | ---- | ---------- | - | --- | ----- |  | ----- | - | - |  | - | ---- | ---- | 
|                                               |       |                                    
|                                               |       | Successor                           |     
|                                               |       |                                     |     
|                                               |       |                                    
|                                               |       | Eight Months Ended January 31, 2004 |     
|                                               |       |                                     |     
|                                               |       | Automotive                          |      |      |           
|                                               |       | Wheels                              |      |      | Components |   |     | Other |  | Total |  
|                                               |       |                                     |      |      |            |   |     |       |  |       |  
|Impairment of manufacturing facilities         |       | $                                   | 1.0  |      |            | $ | 0.8 |       |  | $     |  |   |  | $ | 1.8  |     
|Impairment of machinery, equipment and tooling |       |                                     | 19.9 |      |            |   | 6.7 |       |  |       |  |   |  |   | 26.6 |     
|Severance and other restructuring costs        |       |                                     | 0.5  |      |            |   |    |       |  |       |  |   |  |   | 0.5  |     
|                                               |       |                                     |      |      |            |   |     |       |  |       |   |  
|                                               | Total |                                     | $    | 21.4 |            |   | $   | 7.5   |  |       | $ |  |  |   | $    | 28.9 | 
|                                               |       |                                     |      |      |            |   |     |       |  |       |   |  

|                                               |       |                                |     |     |            |   |     |       |  |       |   |   |  |   |     |     | 
|---------------------------------------------- | ----- | ------------------------------ | --- | --- | ---------- | - | --- | ----- |  | ----- | - | - |  | - | --- | --- | 
|                                               |       |                               
|                                               |       | Predecessor                    |    
|                                               |       |                                |    
|                                               |       |                               
|                                               |       | Four Months Ended May 31, 2003 |    
|                                               |       |                                |    
|                                               |       | Automotive                     |     |     |           
|                                               |       | Wheels                         |     |     | Components |   |     | Other |  | Total |  
|                                               |       |                                |     |     |            |   |     |       |  |       |  
|Impairment of manufacturing facilities         |       | $                              | 0.5 |     |            | $ | 0.1 |       |  | $     |  |   |  | $ | 0.6 |    
|Impairment of machinery, equipment and tooling |       |                                | 1.5 |     |            |   | 3.3 |       |  |       |  |   |  |   | 4.8 |    
|Facility closure costs                         |       |                                | 0.9 |     |            |   |    |       |  |       |  |   |  |   | 0.9 |    
|Severance and other restructuring costs        |       |                                | 0.1 |     |            |   |    |       |  |       |  |   |  |   | 0.1 |    
|                                               |       |                                |     |     |            |   |     |       |  |       |   |  
|                                               | Total |                                | $   | 3.0 |            |   | $   | 3.4   |  |       | $ |  |  |   | $   | 6.4 | 
|                                               |       |                                |     |     |            |   |     |       |  |       |   |  

|                                               |       |             |      |      |            |   |     |       |  |   |       |     |  |   |      |      | 
|---------------------------------------------- | ----- | ----------- | ---- | ---- | ---------- | - | --- | ----- |  | - | ----- | --- |  | - | ---- | ---- | 
|                                               |       |            
|                                               |       | Predecessor |     
|                                               |       |             |     
|                                               |       |            
|                                               |       | Fiscal 2002 |     
|                                               |       |             |     
|                                               |       | Automotive  |      |      |           
|                                               |       | Wheels      |      |      | Components |   |     | Other |  |   | Total |    
|                                               |       |             |      |      |            |   |     |       |  |   |       |    
|Impairment of manufacturing facilities         |       | $           | 1.7  |      |            | $ | 0.8 |       |  | $ |      |     |  | $ | 2.5  |     
|Impairment of machinery, equipment and tooling |       |             | 25.1 |      |            |   | 0.8 |       |  |   | 0.5   |     |  |   | 26.4 |     
|Facility closure costs                         |       |             | 6.7  |      |            |   |    |       |  |   |      |     |  |   | 6.7  |     
|Severance and other restructuring costs        |       |             | 2.9  |      |            |   | 1.0 |       |  |   | 4.0   |     |  |   | 7.9  |     
|                                               |       |             |      |      |            |   |     |       |  |   |       |    
|                                               | Total |             | $    | 36.4 |            |   | $   | 2.6   |  |   | $     | 4.5 |  |   | $    | 43.5 | 
|                                               |       |             |      |      |            |   |     |       |  |   |       |    

F-39



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                               |       |             |      |      |            |   |      |       |  |   |       |     |  |   |      |       | 
|---------------------------------------------- | ----- | ----------- | ---- | ---- | ---------- | - | ---- | ----- |  | - | ----- | --- |  | - | ---- | ----- | 
|                                               |       |            
|                                               |       | Predecessor |     
|                                               |       |             |     
|                                               |       |            
|                                               |       | Fiscal 2001 |     
|                                               |       |             |     
|                                               |       | Automotive  |      |      |           
|                                               |       | Wheels      |      |      | Components |   |      | Other |  |   | Total |    
|                                               |       |             |      |      |            |   |      |       |  |   |       |    
|Impairment of manufacturing facilities         |       | $           | 43.6 |      |            | $ | 36.9 |       |  | $ |      |     |  | $ | 80.5 |      
|Impairment of machinery, equipment and tooling |       |             | 29.6 |      |            |   | 10.7 |       |  |   |      |     |  |   | 40.3 |      
|Facility closure costs                         |       |             | 11.0 |      |            |   | 0.6  |       |  |   |      |     |  |   | 11.6 |      
|Severance and other restructuring costs        |       |             | 2.7  |      |            |   | 0.2  |       |  |   | 6.3   |     |  |   | 9.2  |      
|                                               |       |             |      |      |            |   |      |       |  |   |       |    
|                                               | Total |             | $    | 86.9 |            |   | $    | 48.4  |  |   | $     | 6.3 |  |   | $    | 141.6 | 
|                                               |       |             |      |      |            |   |      |       |  |   |       |    

These losses and charges consist of the following:



| |                                            
| | -------------------------------------------
| | Impairment of Howell, Michigan
    Facility

During the fourth quarter of fiscal 2003, the
Company estimated that the future undiscounted cash flows from
its Howell, Michigan manufacturing facility would not be
sufficient to recover the carrying value of its investment in
building, machinery, equipment and tooling. Accordingly, the
Company recognized an asset impairment loss of $8.8 million
in the fourth quarter of fiscal 2003. Such assets were written
down to fair value based on the expected scrap value, if any, of
machinery, equipment and tooling, and the appraised value of
such building. On April 1, 2004, the Company announced the
closure of this facility. (See Note (20).)



| |                                                 
| | ------------------------------------------------
| | Impairment of La Mirada, California
    Facility

In the third quarter of fiscal 2003, the Company
updated its sales projections to reflect the termination and
balancing out of certain programs. Based on those updated sales
projections, and on the impact of improved operating
efficiencies resulting from ongoing rationalization of
production capacity, the Company determined that its current
estimate of future undiscounted cash flows from its
La Mirada, California facility will not be sufficient to
recover the respective carrying values of that facilitys
machinery and equipment. Accordingly, the Company recorded asset
impairment losses of $5.7 million in the Successor third
quarter of fiscal 2003. Such assets were written down to fair
value based on the expected scrap value, if any, of such
machinery, equipment, and tooling.

In the second quarter of fiscal 2002, the Company
determined, based on its most recent sales projections for its
La Mirada, California facility, that its current estimate
of the future undiscounted cash flows from this facility would
not be sufficient to recover the carrying value of the
facilitys fixed assets and production tooling.
Accordingly, the Company recorded an impairment loss of
$15.5 million in the second quarter of fiscal 2002 related
to those assets. Such assets were written down to fair value
based on the expected scrap value, if any, of such machinery,
equipment, and tooling.



| |                                                                      
| | ---------------------------------------------------------------------
| | Impairment of Gainesville, Georgia and
    Wabash, Indiana facilities

In the third quarter of fiscal 2003, the Company
updated its sales projections to reflect the termination and
balancing out of certain programs. Based on those updated sales
projections, and on the impact of improved operating
efficiencies resulting from ongoing rationalization of
production capacity, the Company determined that its current
estimate of future undiscounted cash flows from its Gainesville,
Georgia and Wabash, Indiana facilities will not be
sufficient to recover the respective carrying values of those
facilities property, plant and equipment. Accordingly, the
Company recorded asset impairment losses of $13.9 million
in the Successor third quarter of fiscal 2003. Such assets were
written down to fair value based on the expected scrap value, if
any, of such machinery, equipment, and tooling.

F-40



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                           
| | ------------------------------------------
| | Impairment of Thailand Greenfield
    Site

During the first quarter of fiscal 2003, the
Company recorded an asset impairment loss of $0.5 million
to write down its Thailand greenfield site to fair value based
on current real estate market conditions. This non-operating
facility was sold by the Company in August 2003.



| |                                                               
| | --------------------------------------------------------------
| | Impairment and Closure of Bowling Green,
    Kentucky Facility

During the first four months of fiscal 2003, the
Predecessor Company recognized additional restructuring charges
of $0.9 million related to the closure of its Bowling
Green, Kentucky facility. These charges relate to additional
plant closure costs and terminated employee health care benefits.

In the fourth quarter of fiscal 2001, the Company
committed to a plan to close its manufacturing facility in
Bowling Green, Kentucky and recorded a restructuring charge of
$10.7 million. This charge related to the termination of
leases and other closure costs, including security and
maintenance costs subsequent to the shutdown date. The decision
to close the plant was based on the weakening of the economy,
the tightened domestic auto industry and changing market
requirements, which have resulted in reduced demand for
fabricated steel wheels. The rationalization of the
Companys fabricated wheel manufacturing capacity will
allow it to reduce overhead and manufacturing costs in North
America. The Company estimated that the future undiscounted cash
flows from this facility would not be sufficient to recover the
carrying value of its investment in machinery, equipment and
tooling. Accordingly, the Company recognized an asset impairment
loss of $42.7 million during the fourth quarter of fiscal
2001. Such assets were written down to fair value based on the
expected scrap value, if any, of such machinery, equipment, and
tooling. This facility, originally scheduled to close in July
2002, operated through the end of fiscal 2002 to service
existing contracts and assist in transitioning production to the
Companys fabricated steel wheel manufacturing facility
located in Sedalia, Missouri. Due to the delayed closure, the
original $10.7 million restructuring charge was revised to
$10.3 million. In addition, the Company recorded
$0.3 million in employee termination and other closure
costs during fiscal 2002 related to this facility. Such
remaining closure costs of $0.6 million are expected to be
paid in fiscal 2004.



| |                                                            
| | -----------------------------------------------------------
| | Impairment and Closure of Petersburg, Michigan
    Facility

During the first quarter of fiscal 2003, the
Predecessor Company recorded an asset impairment loss of
$0.1 million to write down to fair value its Petersburg,
Michigan facility based on current real estate market
conditions. This non-operating facility is classified as
held-for-sale at January 31, 2004, and was subsequently
sold by the Company in February 2004.

As a consequence of notifications received in
April 2001 from certain customers of the Petersburg, Michigan
facility regarding significantly lower future product orders and
of the failure to obtain adequate customer support required to
relocate production, management revised its estimate of future
undiscounted cash flows expected to be generated by the
facility. The Company concluded that this estimated amount was
less than the carrying value of the long-lived assets related to
this facility and, accordingly, recognized an impairment loss of
$28.5 million in fiscal 2001. Such assets were written down
to fair value based on the expected scrap value, if any, of such
machinery, equipment, and tooling. In June 2001, the Company
committed to a plan to close the Petersburg facility, and
accordingly recorded a restructuring charge of
$0.6 million. This charge includes estimated amounts
related to security and other maintenance costs subsequent to
the shutdown date. During fiscal 2002, the Company recorded an
additional impairment loss of $0.3 million to further write
down this facility to fair value based on real estate market
conditions.

F-41



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                          
| | ---------------------------------------------------------
| | Impairment and Closure of Somerset, Kentucky
    Facility

During fiscal 2001, the Company recognized
impairment losses of $6.8 million related to investments in
machinery, equipment and tooling at its Somerset, Kentucky
facility due to a change in managements estimates
regarding the future use of such assets. Such assets were
written down to fair value based on the expected scrap value, if
any, of such machinery, equipment, and tooling. During the first
quarter of fiscal 2002, the Company closed this facility and
recorded a restructuring charge of $6.7 million. This
charge included estimated amounts related to lease termination
costs and other closure costs consisting primarily of security
and maintenance costs subsequent to the shutdown date. The
portion of the charge related to lease terminations in the
amount of $3.5 million has been classified as a liability
subject to compromise at January 31, 2003 and has been
excluded from the table below. Of the other closure costs,
approximately $0.7 million remained unpaid at
January 31, 2004, and is expected to be paid during fiscal
2004. During fiscal 2002, the Company recognized additional
impairment losses of $1.9 million related to investments in
building, machinery, equipment and tooling primarily due to real
estate market conditions and further revisions in
managements estimates regarding the fair value of such
assets.



| |                                              
| | ---------------------------------------------
| | Impairment of Maulbronn, Germany
    Facility

During the fourth quarter of fiscal 2001, the
Company revised its future undiscounted cash flow projections
from its foundry located in Maulbronn, Germany. Based on those
revisions, the Company determined that those cash flows would
not be sufficient to recover the carrying value of the
facilitys long-lived assets and accordingly, recognized an
asset impairment loss of $8.4 million during the fourth
quarter of fiscal 2001. The Company commenced a plan of action
to sell this facility during the fourth quarter of fiscal 2001
and subsequently sold it in the second quarter of fiscal 2002
and recorded a loss on sale of $2.5 million.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Impairment and Restructuring of International
    Fabricated Wheel Operations

The Company recorded various asset impairment
losses and restructuring charges as part of a multiple year
restructuring program to upgrade and improve the Companys
international fabricated wheel operations. During the third
quarter of fiscal 2001, the Company recognized an asset
impairment loss of $0.9 million related to the abandonment
of a greenfield project in Thailand. During the fourth quarter
of fiscal 2001, the Company recognized asset impairment losses
of $11.1 million related to its investments in building,
machinery, equipment and tooling at its fabricated wheel
facility in Königswinter, Germany. Such assets were written
down to fair value based on estimated real estate market values
and the expected scrap value, if any, of related machinery,
equipment, and tooling. The Company transferred production of
certain products to facilities located in the Czech Republic and
in India and further consolidated passenger car and commercial
wheel production within an adjacent facility located in
Königswinter, Germany. In connection with the
decommissioning of a building at its Königswinter, Germany
site, the Company recorded a restructuring charge of
$0.6 million in the fourth quarter of fiscal 2001 related
to maintenance costs subsequent to the decommissioning date.
During fiscal 2002, the Company recorded $2.9 million of
costs related to severance and post-termination benefits at its
locations in Königswinter, Germany, Manresa, Spain and Sao
Paulo, Brazil. The Company also recorded $2.2 million of
such costs during fiscal 2001 at its locations in
Königswinter, Germany and Manresa, Spain.



| |                                          
| | -----------------------------------------
| | Impairment of Machinery and
    Equipment

In May 2003, the Predecessor Company recorded
asset impairment losses of $1.6 million on certain
machinery and equipment in its Components segment due primarily
to a change in managements plan for the future use of
idled machinery and equipment. Such investments in fixed assets
were written down to fair value based on the expected scrap
value, if any, of such machinery and equipment.

F-42



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the first quarter of fiscal 2003, the
Company recorded asset impairment losses of $3.2 million on
certain machinery and equipment in its Automotive Wheels and
Components segments due primarily to a change in
managements plan for the future use of idled machinery and
equipment. Such investments in fixed assets were written down to
fair value based on the expected scrap value, if any, of such
machinery, equipment and tooling.

During fiscal 2002, the Company recorded asset
impairment losses of $10.7 million on certain machinery and
equipment in its Automotive Wheels, Components and Other
segments due to a change in managements plan for the
future use of idled machinery and equipment and the
discontinuance of certain machinery and equipment due to changes
in product mix. Such investments in fixed assets were written
down to fair value based on the expected scrap value, if any, of
such machinery, equipment and tooling.

During fiscal 2001, the Company recognized asset
impairment losses of $22.6 million on certain machinery and
equipment in its Automotive Wheels, Components and Other
Segments due to a change in managements plan for the
future use of idled machinery and equipment and the
discontinuance of certain machinery and equipment. Such
investments in fixed assets were written down to fair value
based on the expected scrap value, if any, of such machinery,
equipment and tooling.



| |                                                  
| | -------------------------------------------------
| | Impairment of White Pigeon, Michigan
    Facility

During the fourth quarter of fiscal 2002, the
Company recorded an asset impairment loss of $0.5 million
to write down the White Pigeon, Michigan facility to fair value
based on current real estate market conditions. This
non-operating facility is currently held for sale by the Company.



| |                                            
| | -------------------------------------------
| | Other Severance and Restructuring
    Costs

As part of ongoing restructuring and
rationalization of its operations, the Company recorded
severance costs of $0.5 million, $0.1 million,
$1.7 million and $0.2 million in the eight months
ended January 31, 2004, four months ended May 31,
3004, fiscal 2002 and fiscal 2001, respectively.



| |                                                                    
| | -------------------------------------------------------------------
| | North American Early Retirement and
    Reduction-In-Force Programs

In fiscal 2002, the Company offered an early
retirement option to approximately 30 employees, of whom 24
accepted by the acceptance date. In connection with this early
retirement offer, the Company recorded a charge of
$3.4 million primarily related to supplemental retirement
benefits and continued medical benefits. The retirement benefit
portion of the charge is recorded as a component of the
Companys accrued benefit cost of the applicable defined
benefit plans, and will be funded as part of the requirements of
those entire plans.

On November 2, 2001, the Company announced
the immediate elimination of 145 positions or approximately 11%
of its salaried workforce across its domestic operations. In
connection with the elimination of the 145 positions, the
Company recorded a restructuring charge of $2.4 million in
the fourth quarter of fiscal 2001, all of which was paid before
the end of fiscal 2002. In addition, the Company announced that
it would offer an early retirement option to approximately 45
salaried employees. Of the 45 employees offered an early
retirement option, 31 accepted by the acceptance date. In
connection with this early retirement offer, the Company
recorded a restructuring charge of $3.9 million in the
fourth quarter of fiscal 2001 primarily related to continued
medical benefits and supplemental retirement benefits. The
retirement benefit portion of the charge is recorded as a
component of the Companys accrued benefit cost of the
applicable defined benefit plans, and will be funded as part of
the requirements of those entire plans.

F-43



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                              
| | ---------------------------------------------
| | Facility Exit Cost and Severance
    Accruals

The following table describes the activity in the
balance sheet accounts affected by the severance and other
facility exit costs (millions of dollars):

|                    |  |             |      |           |               |   |     |                  |  |                   |        |   |                  |         |      |   |  |   |     | 
|------------------- |  | ----------- | ---- | --------- | ------------- | - | --- | ---------------- |  | ----------------- | ------ | - | ---------------- | ------- | ---- | - |  | - | --- | 
|                    |  |             |      | Severance |               |   |     |                  |  |                   |       
|                    |  | January 31, |      |           | and Other     |   |     |                  |  | Cash Payments and |        |   |                 
|                    |  | 2003        |      |           | Restructuring |   |     |                  |  | Foreign Currency  |        |   | January 31, 2004 |        
|                    |  | Accrual     |      |           | Charges       |   |     | Reclassification |  |                   | Impact |   |                  | Accrual |     
|                    |  |             |      |           |               |   |     |                  |  |                   |        |   |                  |         |     
|Facility exit costs |  | $           | 12.6 |           |               | $ | 0.9 |                  |  | $                 | (7.5   | ) |                  | $       | (4.3 | ) |  | $ | 1.7 | 
|Severance           |  |             | 4.0  |           |               |   | 0.6 |                  |  |                   |       |   |                  |         | (3.6 | ) |  |   | 1.0 | 
|                    |  |             |      |           |               |   |     |                  |  |                   |        |   |                  |         |     
|                    |  | $           | 16.6 |           |               | $ | 1.5 |                  |  | $                 | (7.5   | ) |                  | $       | (7.9 | ) |  | $ | 2.7 | 
|                    |  |             |      |           |               |   |     |                  |  |                   |        |   |                  |         |     

Of the facility exit costs accrued as of
January 31, 2003, $7.5 million relates to lease
termination costs which were reclassified to liabilities subject
to compromise and ultimately discharged under the Plan of
Reorganization upon emergence from Chapter 11.



|     |                              
|---- | -----------------------------
|(15) | Commitments and Contingencies



| |                                                           
| | ----------------------------------------------------------
| | Matters Related to Restatement of Financial
    Statements

On February 19, 2002, the Company issued
restated consolidated financial statements as of and for the
fiscal years ended January 31, 2001 and 2000, and related
quarterly periods (the 10-K/ A), and for the fiscal
quarter ended April 30, 2001 (the 10-Q/ A). The
restatement was the result of failure by the Company to properly
apply certain accounting standards generally accepted in the
United States of America, and because certain accounting errors
and irregularities in the Companys financial statements
were identified. The Securities and Exchange Commission (the
SEC) is conducting an investigation into the facts
and circumstances giving rise to the restatements. The Company
has been and intends to continue cooperating with the SEC. The
Company cannot predict the outcome of such an investigation.

On May 3, 2002, a group of purported
purchasers of the Companys bonds commenced a putative
class action lawsuit against thirteen present or former
directors and officers of the Company (but not the Company) and
KPMG LLP, the Companys independent auditor, in the United
States District Court for the Eastern District of Michigan. The
complaint seeks damages for an alleged class of persons who
purchased Company bonds between June 3, 1999 and
September 5, 2001 and claim to have been injured because
they relied on the Companys allegedly materially false and
misleading financial statements. On June 27, 2002, the
plaintiffs filed an amended class action complaint adding CIBC
World Markets Corp. and Credit Suisse First Boston Corporation,
underwriters for certain bonds issued by the Company, as
defendants. These claims were not discharged upon the
effectiveness of the Plan of Reorganization because they are
against the Companys present and former directors and
officers and KPMG LLP, and not against the Company.

Additionally, before the date the Company
commenced its Chapter 11 Bankruptcy case, four other
putative class actions were filed in the United States District
Court for the Eastern District of Michigan against the Company
and certain of its directors and officers, on behalf of a class
of purchasers of Company common stock from June 3, 1999 to
December 13, 2001, based on similar allegations of
securities fraud. On May 10, 2002, the plaintiffs filed a
consolidated and amended class action complaint seeking damages
against the Companys present and former officers and
directors (but not the Company) and KPMG. Pursuant to the
Companys Plan of Reorganization, the Company purchased
directors and officers liability insurance for
certain of these current and former directors and officers and
agreed to indemnify such individuals against certain
liabilities, including those matters described above, up to an
aggregate of $10 million in excess of any coverage to or
for the benefit of all indemnitees.

F-44



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

On June 13, 2002, the Company filed an
adversary complaint and motion for a preliminary injunction in
the Bankruptcy Court requesting the Court to stay the class
action litigation commenced by the bond purchasers and equity
purchasers. Additionally, on July 25, 2002, the Company
filed with the Bankruptcy Court a motion to lift the automatic
stay in the Chapter 11 Filings to allow the insurance
company that provides officer and director liability insurance
to the Company to pay the defense costs of the Companys
present and former officers and directors in such litigation.
The Bankruptcy Court entered an order permitting the insurance
company to pay defense costs incurred by the Companys
present and former officers and directors in the litigation,
subject to certain conditions, in increasing amounts up to
$800,000 pursuant to further authority in the order. After that
order, the Company withdrew its motion for a preliminary
injunction. Since the Effective Date of the Plan of
Reorganization, the automatic stay no longer applies to the
proceeds of the officer and director liability insurance
policies which, therefore, have been generally available for
defense costs incurred by the individual director and officer
insured defendants in the class action and related litigations.



| |                  
| | -----------------
| | Legal Proceedings

During the pendency of the Companys
Chapter 11 cases, certain disputes arose between the
Company, on one hand, and DESC Automotriz, S.A. de C.V.
(DESC) and Hayes Wheels Aluminio, S.A. de C.V.
(HW Aluminio) on the other, relating to the
Companys 40% joint venture interest in Hayes Wheels de
Mexico, S.A. de C.V., a Mexican corporation manufacturing
aluminum and steel wheels (HW de Mexico). In
connection with these disputes DESC and HW Aluminio asserted
administrative expense claims against the Company in an amount
not less than $20.6 million relating to allegedly improper
actions taken by the Company with respect to HW de Mexico during
the Chapter 11 cases. On January 15, 2004, the Company
purchased certain assets from HW Aluminio and sold its 40%
interest in HW de Mexico to DESC. As a part of this transaction,
the parties agreed to dismiss and withdraw all litigation
between themselves. All pleadings necessary to dismiss and
withdraw such matters have been filed with and approved by the
necessary courts.

In October 2003, General Electric Credit
Corporation (GECC) filed an amended administrative
claim in the Bankruptcy Court for $7.5 million relating to
certain leased equipment. The leases were rejected during the
Companys Chapter 11 cases. GECC is alleging that its
damages were incurred post-petition because the equipment was
returned post-petition. If the Bankruptcy Court determines that
GECCs damages are a post-petition expense, GECC may be
entitled to an administrative claim for the claims full
amount. The Company is disputing the amount and the merits of
GECCs claim.

The Company is the defendant in a patent
infringement matter filed in 1997 in the United States District
Court, Eastern District of Michigan. Lacks Incorporated
(Lacks) alleged that the Company infringed on three
patents held by Lacks relating to chrome-plated plastic cladding
for steel wheels. Prior to fiscal 2000, the Federal District
Court dismissed all claims relating to two of the three patents
that Lacks claimed were infringed and dismissed many of the
claims relating to the third patent. The remaining claims
relating to the third patent were submitted to a special master.
In January 2001, the special master issued a report finding the
Lacks third patent was invalid and recommending that
Lacks remaining claims be dismissed, the trial court
accepted these recommendations. Lacks appealed this matter to
the Federal Circuit Court. The Federal Circuit Court vacated the
trial courts ruling that the third patent was invalid and
remanded the matter back to the trial court for further
proceedings. In addition to the Companys defenses in the
lawsuit, the Company has certain rights of indemnification
against a co-defendant in the matter that supplied the allegedly
infringing product to the Company. In July 2003, Lacks filed an
administrative claim in the Bankruptcy Court for
$12 million relating to the alleged patent infringement.

The Company was party to a license agreement with
Kuhl Wheels, LLC (Kuhl), whereby Kuhl granted the
Company an exclusive patent license concerning high
vent steel wheel technology known as the Kuhl Wheel (the
Kuhl Wheel), which agreement was terminated as of
January 10, 2003 pursuant to a stipulation between the
Company and Kuhl entered in connection with the Companys
bankruptcy proceeding.

F-45



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The original license agreement (as amended, the
License Agreement), dated May 11, 1999, granted
the Company a non-exclusive license for the Kuhl Wheel
technology. The License Agreement was subsequently amended to
provide the Company with an exclusive worldwide license. On
January 14, 2003, the Company filed a Complaint for
Declaratory and Injunctive Relief against Kuhl and its
affiliate, Epilogics Group, in the United States District Court
for the Eastern District of Michigan. The Company commenced such
action seeking a declaration of noninfringement of two United
States patents and injunctive relief to prevent Epilogics Group
and Kuhl from asserting claims of patent infringement against
the Company, and disclosing and using the Companys
technologies, trade secrets and confidential information to
develop, market, license, manufacture or sell automotive wheels.

In the ordinary course of its business, the
Company is a party to other judicial and administrative
proceedings involving its operations and products, which may
include allegations as to employment practices and manufacturing
quality, design and safety. The Company carries insurance
coverage in such amounts in excess of its self-insured retention
as management believes to be reasonable under the circumstances
and which may or may not cover any or all of the Companys
liabilities in respect of claims and lawsuits. After reviewing
the proceedings that are currently pending (including the
probable outcomes, reasonably anticipated costs and expenses,
availability and limits of insurance rights under
indemnification agreements and established reserves for
uninsured liabilities), management believes that the outcome of
these proceedings will not have a material adverse effect on the
financial condition or ongoing results of operations of the
Company.



| |       
| | ------
| | Leases

The Company leases certain production facilities
and equipment under various agreements expiring from 2004 to
2008 and later years. The following is a schedule of future
minimum rental payments required under operating and capital
leases that have initial or remaining non-cancelable lease terms
in excess of one year as of January 31, 2004 (millions of
dollars):

|                                                                  |                                                                      |         |      |      |           |   |      |      | 
|----------------------------------------------------------------- | -------------------------------------------------------------------- | ------- | ---- | ---- | --------- | - | ---- | ---- | 
|Year Ending January 31:                                           |                                                                      | Capital |      |      | Operating |  
|                                                                  |                                                                      |         |      |      |           |  
|2005                                                              |                                                                      | $       | 5.0  |      |           | $ | 13.1 |     
|2006                                                              |                                                                      |         | 4.7  |      |           |   | 7.3  |     
|2007                                                              |                                                                      |         | 1.5  |      |           |   | 4.3  |     
|2008                                                              |                                                                      |         | 5.8  |      |           |   | 1.4  |     
|2009 and later years                                              |                                                                      |         |     |      |           |   | 1.0  |     
|                                                                  |                                                                      |         |      |      |           |  
|                                                                  | Total minimum payments required                                      |         | $    | 17.0 |           |   | $    | 27.1 | 
|                                                                  |                                                                      |         |      |      |           |  
|Less amount representing interest                                 |                                                                      |         | (0.8 | )    |           |   |      |     
|                                                                  |                                                                      |         |      |      |           |  
|                                                                  | Present value of net minimum capital lease
    payments              |         |      | 16.2 |           |   |      |      | 
|Less current installments of obligations under
    capital leases |                                                                      |         | (4.3 | )    |           |   |      |     
|                                                                  |                                                                      |         |      |      |           |  
|                                                                  | Obligations under capital leases, excluding
    current installments |         | $    | 11.9 |           |   |      |      | 
|                                                                  |                                                                      |         |      |      |           |  

Rent expense was $14.0 million,
$1.2 million, $28.1 million and $31.0 million for
the eight months ended January 31, 2004, the four months
ended May 31, 2004, and the years ended January 31,
2003 and 2002, respectively.

(16)     Investments
in Joint Ventures

As a result of the HLI Jantas transaction and the
purchase of a cast aluminum wheel plant located in Chihuahua,
Mexico as discussed in Note (4), the Company no longer
holds any significant investments in joint ventures as of
January 31, 2004.

F-46



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During fiscal 2002, the Company sold its 49%
interest in a Portuguese fabricated wheel joint venture for cash
proceeds of $1.4 million. In connection with the sale, the
Company recognized a gain of $0.4 million, which is
included in Other income, net, on the accompanying consolidated
statement of operations. In the second quarter of fiscal 2001,
the Company recorded a $3.8 million loss on investment in
joint venture to write off its investment in its Mexican joint
venture, which had incurred and expects to continue to incur
significant operating losses. During the fourth quarter of
fiscal 2001, the Company sold its tire and wheel assembly joint
venture for cash proceeds of $11.0 million. In connection
with the sale, the Company recognized a loss of
$7.8 million, which is included in Other income, net, on
the accompanying consolidated statement of operations.

(17)     Long Term
Incentive Plan

Upon the Effective Date, all options under the
Predecessor Companys stock option plans were cancelled and
those plans were terminated in accordance with the Plan of
Reorganization.

In conjunction with the Plan of Reorganization,
the Company filed a proposed Long-Term Incentive Plan with the
Bankruptcy Court. The Long-Term Incentive Plan was approved by
the Bankruptcy Court on May 12, 2003 in connection with the
confirmation of the Plan of Reorganization, and in accordance
with Section 303 of the Delaware General Corporation Law,
such approval constituted stockholder approval of the Long-Term
Incentive Plan. The Long-Term Incentive Plan became effective on
July 23, 2003, the date that the Plan was approved by the
Companys Board of Directors. No award may be granted under
the Long-Term Incentive Plan after July 23, 2013.

The Long-Term Incentive Plan provides for the
grant of incentive stock options (ISOs), stock
options that do not qualify as ISOs, restricted shares of common
stock, and restricted stock units (collectively, the
awards). The number of shares subject to awards
under the Long-Term Incentive Plan is 3,734,554 (subject to
adjustment in certain circumstances as provided for in the
plan). Any officer, director or key employee of the Company or
any of its subsidiaries is eligible to be designated a
participant in the Long-Term Incentive Plan.

On July 28, 2003, the Company granted
1,887,162 stock options and 1,258,107 restricted stock units to
certain employees and officers, and 65,455 options and 43,637
restricted stock units to non-employee members of the
Companys Board of Directors. The weighted average exercise
price of the stock options was $13.93 per share, which was
equal to the fair value on the date of grant. The stock options
granted to certain employees and officers of the Company vest
25% per year over a four year period. The restricted stock
units granted to certain employees and officers of the Company
vest one third after three years and the remaining two thirds
after four years. The stock options and restricted stock units
granted to the non-employee directors vest over a two year
period. At January 31, 2004, the Company had 619,936 shares
available for award.

Stock option activity under the Long Term
Incentive Plan is as follows:

|                              |  |                  |           |          |                |   |       | 
|----------------------------- |  | ---------------- | --------- | -------- | -------------- | - | ----- | 
|                              |  |                 
|                              |  | January 31, 2004 |          
|                              |  |                  |          
|                              |  |                  |           | Weighted |               
|                              |  | Number of        |           |          | Average        |  
|                              |  | Shares           |           |          | Exercise Price |  
|                              |  |                  |           |          |                |  
|Outstanding beginning of year |  |                  |          |          |                |   |      | 
|Awarded                       |  |                  | 1,982,906 |          |                | $ | 13.97 | 
|Forfeited                     |  |                  | (114,141  | )        |                | $ | 13.93 | 
|Exercised                     |  |                  |          |          |                |   |      | 
|                              |  |                  |           |          |                |  
|Outstanding at end of year    |  |                  | 1,868,765 |          |                | $ | 13.98 | 
|                              |  |                  |           |          |                |  

F-47



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
stock options outstanding at January 31, 2004:

|                        |  |           |           |          |                |  |            |                |  |   |       | 
|----------------------- |  | --------- | --------- | -------- | -------------- |  | ---------- | -------------- |  | - | ----- | 
|                        |  |           |           | Weighted |                |  | Weighted   |               
|                        |  | Number of |           |          | Average        |  |            | Average        | 
|Range of Exercise Price |  | Shares    |           |          | Remaining Life |  |            | Exercise Price | 
|                        |  |           |           |          |                |  |            |                | 
|$13.93 - $18.93         |  |           | 1,868,765 |          |                |  | 9.49 years |                |  | $ | 13.98 | 

As a result of issuing the restricted stock units
discussed above and the restricted stock units issued under the
CERP (see Note (1)), the Company will recognize
compensation expense of $23.1 million in results of
operations over the respective vesting periods. During the eight
months ended January 31, 2004, the Company recognized
$4.1 million of compensation expense related to such
restricted stock units.

At January 31, 2004, Series A Warrants
to purchase 957,447 shares of common stock were
outstanding. Each Series A Warrant allows the holder
thereof to acquire one share of common stock for a purchase
price of $25.83. The warrants are exercisable from June 3,
2003 through June 3, 2006. At January 31, 2004,
Series B Warrants to purchase 957,447 shares of common
stock were outstanding. Each Series B Warrant allows the
holder thereof to acquire one share of common stock for a
purchase price of $25.83. The warrants are exercisable from
June 3, 2003 through June 3, 2008.



|     |                    
|---- | -------------------
|(18) | Segment Information

SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, directs
companies to use the management approach for segment
reporting. This approach reflects managements organization
of business segments and is consistent with how the Company and
its key decision-makers assess operating performance, make
operating decisions and allocate resources. This approach also
considers the existence of managers responsible for each
business segment and how information is presented to the
Companys Board of Directors. The statement requires
disclosures for each segment that are similar to those
previously required and geographic data by country.

The Company is organized based primarily on
markets served and products produced. Under this organization
structure, the Companys operating segments have been
aggregated into three reportable segments: Automotive Wheels,
Components and Other. The Automotive Wheels segment includes
results from the Companys operations that primarily design
and manufacture fabricated steel and cast aluminum wheels for
original equipment manufacturers in the global passenger car and
light vehicle markets. The Components segment includes results
from the Companys operations that primarily design and
manufacture suspension, brake and powertrain components for
original equipment manufacturers in the global passenger car and
light vehicle markets. The Other segment includes results from
the Companys operations that primarily design and
manufacture wheel and brake products for commercial highway and
aftermarket customers in North America. The Other segment also
includes financial results related to the corporate office and
elimination of certain intercompany activities.

The accounting policies of the operating segments
are the same as those described in the summary of significant
accounting policies described in Note (2). The Company
evaluates the performance of its operating segments based
primarily on sales, operating profit and cash flow.

F-48



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table presents revenues and other
financial information by business segment (millions of dollars):

|                                      |                   |             |   |       |             |   |       |             |         |   |             |         |         |   |   |         |         |  
|------------------------------------- | ----------------- | ----------- | - | ----- | ----------- | - | ----- | ----------- | ------- | - | ----------- | ------- | ------- | - | - | ------- | ------- | -
|                                      |                   |             |   |      
|                                      |                   | Successor   |   |       | Predecessor |  
|                                      |                   |             |   |       |             |  
|                                      |                   | Eight       |   |       | Four        |   |       |            
|                                      |                   | Months      |   |       | Months      |   |       | Year        |         |   | Year        |        
|                                      |                   | Ended       |   |       | Ended       |   |       | Ended       |         |   | Ended       |        
|                                      |                   | January 31, |   |       | May 31,     |   |       | January 31, |         |   | January 31, |        
|                                      |                   | 2004        |   |       | 2003        |   |       | 2003        |         |   | 2002        |        
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|Revenues:                             |                   |             |   |       |             |   |       |             |         |   |             |         |         |   |   |        
|                                      | Automotive Wheels |             | $ | 825.3 |             |   | $     | 403.5       |         |   | $           | 1,168.8 |         |   | $ | 1,232.8 |        
|                                      | Components        |             |   | 460.2 |             |   |       | 248.1       |         |   |             | 737.7   |         |   |   | 657.9   |        
|                                      | Other             |             |   | 81.1  |             |   |       | 38.2        |         |   |             | 95.1    |         |   |   | 148.4   |        
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|                                      |                   | Total       |   | $     | 1,366.6     |   |       | $           | 689.8   |   |             | $       | 2,001.6 |   |   | $       | 2,039.1 |  
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|Earnings (loss) from operations:      |                   |             |   |       |             |   |       |             |         |   |             |         |         |   |   |        
|                                      | Automotive Wheels |             | $ | 30.0  |             |   | $     | 27.5        |         |   | $           | 32.5    |         |   | $ | (113.2  | )      
|                                      | Components        |             |   | (0.1  | )           |   |       | 9.5         |         |   |             | 25.1    |         |   |   | (53.6   | )      
|                                      | Other             |             |   | (18.4 | )           |   |       | 13.5        |         |   |             | (57.9   | )       |   |   | (43.8   | )      
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|                                      |                   | Total       |   | $     | 11.5        |   |       | $           | 50.5    |   |             | $       | (0.3    | ) |   | $       | (210.6  | )
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|Depreciation and amortization:        |                   |             |   |       |             |   |       |             |         |   |             |         |         |   |   |        
|                                      | Automotive Wheels |             | $ | 63.6  |             |   | $     | 25.4        |         |   | $           | 76.8    |         |   | $ | 90.4    |        
|                                      | Components        |             |   | 40.0  |             |   |       | 18.2        |         |   |             | 46.1    |         |   |   | 53.2    |        
|                                      | Other             |             |   | 7.5   |             |   |       | 2.8         |         |   |             | 9.1     |         |   |   | 12.8    |        
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|                                      |                   | Total       |   | $     | 111.1       |   |       | $           | 46.4    |   |             | $       | 132.0   |   |   | $       | 156.4   |  
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|Capital expenditures:                 |                   |             |   |       |             |   |       |             |         |   |             |         |         |   |   |        
|                                      | Automotive Wheels |             | $ | 51.9  |             |   | $     | 13.5        |         |   | $           | 52.7    |         |   | $ | 84.5    |        
|                                      | Components        |             |   | 44.0  |             |   |       | 11.2        |         |   |             | 49.4    |         |   |   | 54.6    |        
|                                      | Other             |             |   | 10.8  |             |   |       | 1.6         |         |   |             | 4.7     |         |   |   | 7.9     |        
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|                                      |                   | Total       |   | $     | 106.7       |   |       | $           | 26.3    |   |             | $       | 106.8   |   |   | $       | 147.0   |  
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|Extraordinary gain on debt discharge: |                   |             |   |       |             |   |       |             |         |   |             |         |         |   |   |        
|Automotive Wheels                     |                   | $           |  |       |             | $ | 81.1  |             |         | $ |            |         |         | $ |  |        
|Components                            |                   |             |  |       |             |   | 58.3  |             |         |   |            |         |         |   |  |        
|Other                                 |                   |             |  |       |             |   | 937.3 |             |         |   |            |         |         |   |  |        
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        
|                                      |                   | Total       |   | $     |            |   |       | $           | 1,076.7 |   |             | $       |        |   |   | $       |        |  
|                                      |                   |             |   |       |             |   |       |             |         |   |             |        

F-49



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table presents certain balance
sheet information by business segment (millions of dollars):

|              |                   |             |   |         |             |  |   |         |         | 
|------------- | ----------------- | ----------- | - | ------- | ----------- |  | - | ------- | ------- | 
|              |                   | Successor   |   |         | Predecessor | 
|              |                   |             |   |         |             | 
|              |                   | January 31, |   |         | January 31, | 
|              |                   | 2004        |   |         | 2003        | 
|              |                   |             |   |         |             | 
|Total assets: |                   |             |   |         |             |  |   |        
|              | Automotive Wheels |             | $ | 1,490.6 |             |  | $ | 1,049.0 |        
|              | Components        |             |   | 541.3   |             |  |   | 546.4   |        
|              | Other             |             |   | 264.7   |             |  |   | 251.2   |        
|              |                   |             |   |         |             | 
|              |                   | Total       |   | $       | 2,296.6     |  |   | $       | 1,846.6 | 
|              |                   |             |   |         |             | 
|Goodwill:     |                   |             |   |         |             |  |   |        
|              | Automotive Wheels |             | $ | 416.2   |             |  | $ | 189.6   |        
|              | Components        |             |   |        |             |  |   |        |        
|              | Other             |             |   |        |             |  |   | 1.7     |        
|              |                   |             |   |         |             | 
|              |                   | Total       |   | $       | 416.2       |  |   | $       | 191.3   | 
|              |                   |             |   |         |             | 

The following table presents revenues for each of
the geographic areas in which the Company operates (millions of
dollars):

|          |                  |             |   |       |             |  |   |             |       |  |             |         |         |  |   |         |         | 
|--------- | ---------------- | ----------- | - | ----- | ----------- |  | - | ----------- | ----- |  | ----------- | ------- | ------- |  | - | ------- | ------- | 
|          |                  |             |   |      
|          |                  | Successor   |   |       | Predecessor | 
|          |                  |             |   |       |             | 
|          |                  | Eight       |   |       | Four        |  |   |            
|          |                  | Months      |   |       | Months      |  |   | Year        |       |  | Year        |        
|          |                  | Ended       |   |       | Ended       |  |   | Ended       |       |  | Ended       |        
|          |                  | January 31, |   |       | May 31,     |  |   | January 31, |       |  | January 31, |        
|          |                  | 2004        |   |       | 2003        |  |   | 2003        |       |  | 2002        |        
|          |                  |             |   |       |             |  |   |             |       |  |             |        
|Revenues: |                  |             |   |       |             |  |   |             |       |  |             |         |         |  |   |        
|          | North America    |             | $ | 736.9 |             |  | $ | 410.4       |       |  | $           | 1,256.0 |         |  | $ | 1,253.6 |        
|          | Europe and other |             |   | 629.7 |             |  |   | 279.4       |       |  |             | 745.6   |         |  |   | 785.5   |        
|          |                  |             |   |       |             |  |   |             |       |  |             |        
|          |                  | Total       |   | $     | 1,366.6     |  |   | $           | 689.8 |  |             | $       | 2,001.6 |  |   | $       | 2,039.1 | 
|          |                  |             |   |       |             |  |   |             |       |  |             |        

The following table presents net property, plant
and equipment for each of the geographic areas in which the
Company operates (millions of dollars):

|                                 |                  |             |   |       |             |  |   |       |       | 
|-------------------------------- | ---------------- | ----------- | - | ----- | ----------- |  | - | ----- | ----- | 
|                                 |                  | Successor   |   |       | Predecessor | 
|                                 |                  |             |   |       |             | 
|                                 |                  | January 31, |   |       | January 31, | 
|                                 |                  | 2004        |   |       | 2003        | 
|                                 |                  |             |   |       |             | 
|Net property, plant & equipment: |                  |             |   |       |             |  |   |      
|                                 | North America    |             | $ | 427.1 |             |  | $ | 535.7 |      
|                                 | Europe and other |             |   | 539.4 |             |  |   | 415.5 |      
|                                 |                  |             |   |       |             | 
|                                 |                  | Total       |   | $     | 966.5       |  |   | $     | 951.2 | 
|                                 |                  |             |   |       |             | 

F-50



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                       
| | ----------------------
| | Customer Concentration

Approximately 50% of the Companys revenues
are from three automotive manufacturers and their subsidiaries.
The following is a summary of the percentage of revenues from
these major customers on a worldwide basis:

|                           |  |             |      |   |             |  |      |             |  |  |             |   |  |  |      |  
|-------------------------- |  | ----------- | ---- | - | ----------- |  | ---- | ----------- |  |  | ----------- | - |  |  | ---- | -
|                           |  |             |      |  
|                           |  | Successor   |      |   | Predecessor | 
|                           |  |             |      |   |             | 
|                           |  | Eight       |      |   | Four        |  |      |            
|                           |  | Months      |      |   | Months      |  |      | Year        |  |  | Year        |  
|                           |  | Ended       |      |   | Ended       |  |      | Ended       |  |  | Ended       |  
|                           |  | January 31, |      |   | May 31,     |  |      | January 31, |  |  | January 31, |  
|                           |  | 2004        |      |   | 2003        |  |      | 2003        |  |  | 2002        |  
|                           |  |             |      |   |             |  |      |             |  |  |             |  
|Ford Motor Company         |  |             | 26.3 | % |             |  | 15.8 | %           |  |  | 22.8        | % |  |  | 19.8 | %
|DaimlerChrysler            |  |             | 19.5 | % |             |  | 8.2  | %           |  |  | 17.3        | % |  |  | 19.5 | %
|General Motors Corporation |  |             | 15.1 | % |             |  | 3.6  | %           |  |  | 12.0        | % |  |  | 14.3 | %

(19)     Selected
Quarterly Financial Data (Unaudited)

The following represents selected quarterly
financial data for the Company (millions of dollars, except per
share amounts):

|                                                                |  |             |       |   |             |   |       |            |  |   |           |   |  |           |         |   |  |   |       |  
|--------------------------------------------------------------- |  | ----------- | ----- | - | ----------- | - | ----- | ---------- |  | - | --------- | - |  | --------- | ------- | - |  | - | ----- | -
|                                                                |  |             |       |  
|                                                                |  | Successor   |       |   | Predecessor |  
|                                                                |  |             |       |   |             |  
|                                                                |  | Quarter     |       |   | Quarter     |   |       | Two Months |  |   | One Month |   |  | Quarter   |        
|                                                                |  | Ended       |       |   | Ended       |   |       | Ended      |  |   | Ended     |   |  | Ended     |        
|                                                                |  | January 31, |       |   | October 31, |   |       | July 31,   |  |   | May 31,   |   |  | April 30, |        
|                                                                |  | 2004        |       |   | 2003        |   |       | 2003       |  |   | 2003      |   |  | 2003      |        
|                                                                |  |             |       |   |             |   |       |            |  |   |           |   |  |           |        
|Net sales                                                       |  | $           | 507.4 |   |             | $ | 530.9 |            |  | $ | 328.3     |   |  | $         | 174.5   |   |  | $ | 515.3 |  
|Gross profit                                                    |  |             | 42.1  |   |             |   | 69.3  |            |  |   | 29.4      |   |  |           | 26.7    |   |  |   | 51.7  |  
|Earnings (loss) before extraordinary gain on debt
    discharge |  |             | (27.3 | ) |             |   | (10.0 | )          |  |   | (9.2      | ) |  |           | (11.2   | ) |  |   | (22.6 | )
|Extraordinary gain on debt discharge                            |  |             |      |   |             |   |      |            |  |   |          |   |  |           | 1,076.7 |   |  |   |      |  
|Net income (loss)                                               |  |             | (27.3 | ) |             |   | (10.0 | )          |  |   | (9.2      | ) |  |           | 1,065.5 |   |  |   | (22.6 | )
|Basic and diluted net loss per share                            |  | $           | (0.91 | ) |             | $ | (0.33 | )          |  | $ | (0.31     | ) |  |           |         |   |  |   |       |  
|Goodwill(1)                                                     |  | $           | 416.2 |   |             | $ | 388.8 |            |  | $ | 392.9     |   |  |           |         |   |  | $ | 193.4 |  



---



|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of January 31, 2004, October 31,
    2003 and July 31, 2003, all of the Companys goodwill
    was recorded in its Automotive wheels segment.

|                                                                               |  |             |       |   |             |   |       |          |  |   |           |   |  |        |        |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ----------- | ----- | - | ----------- | - | ----- | -------- |  | - | --------- | - |  | ------ | ------ | - |  | - | ------- | -
|                                                                               |  |            
|                                                                               |  | Predecessor |      
|                                                                               |  |             |      
|                                                                               |  | Quarter     |       |   | Quarter     |   |       | Quarter  |  |   | Quarter   |   |  |       
|                                                                               |  | Ended       |       |   | Ended       |   |       | Ended    |  |   | Ended     |   |  | Total  |       
|                                                                               |  | January 31, |       |   | October 31, |   |       | July 31, |  |   | April 30, |   |  | Fiscal |       
|                                                                               |  | 2003        |       |   | 2002        |   |       | 2002     |  |   | 2002(2)   |   |  | 2002   |       
|                                                                               |  |             |       |   |             |   |       |          |  |   |           |   |  |        |       
|Net sales                                                                      |  | $           | 475.5 |   |             | $ | 535.4 |          |  | $ | 504.0     |   |  | $      | 486.7  |   |  | $ | 2,001.6 |  
|Gross profit                                                                   |  |             | 54.1  |   |             |   | 70.2  |          |  |   | 38.3      |   |  |        | 45.1   |   |  |   | 207.7   |  
|Earnings (loss) before cumulative effect of
    change in accounting principle |  |             | (22.8 | ) |             |   | 3.7   |          |  |   | (28.0     | ) |  |        | (33.0  | ) |  |   | (80.1   | )
|Cumulative effect of change in accounting
    principle                        |  |             |      |   |             |   |      |          |  |   |          |   |  |        | 554.4  |   |  |   | 554.4   |  
|Net income (loss)                                                              |  | $           | (22.8 | ) |             | $ | 3.7   |          |  | $ | (28.0     | ) |  | $      | (587.4 | ) |  | $ | (634.5  | )



---



|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(2) | Includes $554.4 million charge for the
    cumulative effect of the adoption of SFAS No. 142.

F-51



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(20)     Subsequent
Events



| |                                         
| | ----------------------------------------
| | Closure of Howell, Michigan
    Facility

On April 1, 2004, the Company announced the
closure of its Howell, Michigan manufacturing facility. As part
of managements on-going rationalization initiatives, the
decision to close the Howell facility was based on improving
capacity utilization and overall efficiency of the Company.
Production of the aluminum wheels manufactured at the facility
will be transferred to other manufacturing facilities in the
United States. The Company anticipates that it will incur and
recognize restructuring and other closure costs of approximately
$8 million to $10 million during fiscal 2004 and 2005,
primarily related to lease termination, plant closing costs and
maintenance subsequent to the shutdown date.

During the fourth quarter of fiscal 2003, the
Company estimated that the future undiscounted cash flows from
the Howell facility would not be sufficient to recover the
carrying value of its investment in machinery, equipment and
tooling. Accordingly, the Company recognized an asset impairment
loss of $8.8 million in the fourth quarter of fiscal 2003
(see Note (14)).



| |                      
| | ---------------------
| | Common Stock Offering

On February 11, 2004, the Company closed on
a primary offering of 7,720,970 shares of common stock, and
a secondary offering of 2 million shares of its common
stock. The Company used the net proceeds of approximately
$118.6 million that it received from the primary offering
to redeem $87.5 million aggregate principal amount, plus
accrued and unpaid interest thereon, of its outstanding New
Senior Notes on March 12, 2004, to prepay
$16.0 million, plus accrued and unpaid interest thereon, of
its New Term Loan on February 12, 2004, and for general
corporate purposes. In connection with the redemption of the New
Senior Notes, the Company will record an approximate
$11.8 million loss on early extinguishment of debt,
including recognition of deferred debt issuance costs and
original issue discount, in the first quarter of fiscal 2004.



|     |                                                 
|---- | ------------------------------------------------
|(21) | Condensed Consolidating Financial
    Statements

The following condensed consolidating financial
statements present the financial information required with
respect to those entities which guarantee certain of the
Companys debt.

The condensed consolidating financial statements
are presented on the equity method. Under this method, the
investments in subsidiaries are recorded at cost and adjusted
for the Companys share of the subsidiaries
cumulative results of operations, capital contributions,
distributions and other equity changes. The principal
elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions.



| |                                                    
| | ---------------------------------------------------
| | Guarantor and Nonguarantor Financial
    Statements

As further discussed in Notes (1) and (11),
in connection with the Plan of Reorganization, HLI issued
$250.0 million aggregate principal amount of the New Senior
Notes. The New Senior Notes are guaranteed by New Hayes and
substantially all of New Hayes domestic subsidiaries
(other than HLI as the issuer of the New Senior Notes)
(collectively, the Guarantor Subsidiaries). None of
New Hayes foreign subsidiaries have guaranteed the New
Senior Notes, nor have two of New Hayes domestic
subsidiaries owned by foreign subsidiaries of New Hayes
(collectively, the Nonguarantor Subsidiaries).
Following emergence, all the operations, assets and liabilities
of New Hayes and ParentCo (collectively, the Parent)
and the New Guarantor Subsidiaries reflected in the table below
are owned and operated by HLI and the New Guarantor Subsidiaries.

F-52



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

For the Eight Months Ended January 31,
2004

|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |      |       |      |      |      |         |       |       |      | 
|------------------------------------------------------------------ | ---------------------------------------------------------------- | ---------------------------------------- | ------------------------------- | ----- | ------ | --------- | ----- | ------------ | ------------ | ----- | ------------ | ----- | ----- | ------------ | ----- | ---- | ----- | ---- | ----- | ---- | ---- | ---- | ------- | ----- | ----- | ---- | 
|                                                                   |                                                                  |                                          |                                 |       |        | Guarantor |       |              | Nonguarantor |       |              |       |       |             
|                                                                   |                                                                  | Parent                                   |                                 |       | Issuer |           |       | Subsidiaries |              |       | Subsidiaries |       |       | Eliminations |       |      | Total |     
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     
|                                                                   |                                                                  |                                         
|                                                                   |                                                                  | (millions of dollars)                    |                                
|Net sales                                                          |                                                                  | $                                        |                                |       |        | $         | 2.6   |              |              | $     | 710.6        |       |       | $            | 682.6 |      |       | $    | (29.2 | )    |      | $    | 1,366.6 |      
|Cost of goods sold                                                 |                                                                  |                                          |                                |       |        |           | 20.8  |              |              |       | 653.2        |       |       |              | 581.0 |      |       |      | (29.2 | )    |      |      | 1,225.8 |      
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     
|Gross profit (loss)                                                |                                                                  | $                                        |                                |       |        | $         | (18.2 | )            |              | $     | 57.4         |       |       | $            | 101.6 |      |       | $    |      |      |      | $    | 140.8   |      
|Marketing, general and administration                              |                                                                  |                                          |                                |       |        |           | 1.5   |              |              |       | 56.2         |       |       |              | 38.5  |      |       |      |      |      |      |      | 96.2    |      
|Amortization of intangibles assets                                 |                                                                  |                                          |                                |       |        |           | 0.6   |              |              |       | 1.3          |       |       |              | 6.6   |      |       |      |      |      |      |      | 8.5     |      
|Equity in (earnings) losses of joint
    ventures and subsidiaries |                                                                  |                                          | 47.6                            |       |        |           |      |              |              |       | 1.1          |       |       |              |      |      |       |      | (48.7 | )    |      |      |        |      
|Asset impairments and other restructuring charges                  |                                                                  |                                          |                                 |       |        |           |       |              |              |       | 28.4         |       |       |              | 0.5   |      |       |      |       |      |      |      | 28.9    |      
|Other expense(income), net                                         |                                                                  |                                          |                                |       |        |           | (2.7  | )            |              |       | (2.4         | )     |       |              | 0.8   |      |       |      |      |      |      |      | (4.3    | )    
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     
|                                                                   |                                                                  |                                          | Earnings (loss) from operations |       |        | (47.6     | )     |              |              | (17.6 | )            |       |       | (27.2        | )     |      |       | 55.2 |       |      |      | 48.7 |         |       |       | 11.5 | 
|Interest (income) expense, net                                     |                                                                  |                                          | (1.1                            | )     |        |           | (0.6  | )            |              |       | 24.6         |       |       |              | 19.2  |      |       |      |      |      |      |      | 42.1    |      
|Other non-operating expense                                        |                                                                  |                                          |                                |       |        |           | 0.5   |              |              |       |             |       |       |              | 0.6   |      |       |      |      |      |      |      | 1.1     |      
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     
|                                                                   | Earnings (loss) before taxes on income and
    minority interest |                                          |                                 | (46.5 | )      |           |       | (17.5        | )            |       |              | (51.8 | )     |              |       | 35.4 |       |      |       | 48.7 |      |      |         | (31.7 | )    
|Income tax provision (benefit)                                     |                                                                  |                                          |                                |       |        |           |      |              |              |       | 1.0          |       |       |              | 9.9   |      |       |      |      |      |      |      | 10.9    |      
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     
|                                                                   |                                                                  | Earnings (loss) before minority interest |                                 |       | (46.5  | )         |       |              | (17.5        | )     |              |       | (52.8 | )            |       |      | 25.5  |      |       |      | 48.7 |      |         |       | (42.6 | )   
|Minority interest                                                  |                                                                  |                                          |                                |       |        |           |      |              |              |       |             |       |       |              | 3.9   |      |       |      |      |      |      |      | 3.9     |      
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     
|Net income (loss)                                                  |                                                                  |                                          | (46.5                           | )     |        |           | (17.5 | )            |              |       | (52.8        | )     |       |              | 21.6  |      |       |      | 48.7  |      |      |      | (46.5   | )    
|                                                                   |                                                                  |                                          |                                 |       |        |           |       |              |              |       |              |       |       |              |       |      |       |     

F-53



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

PREDECESSOR COMPANY


For the Four Months Ended May 31,
2003

|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |        |        |   |   |         |          |  
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------ | ------- | --------- | ------------ | - | ------------ | ------------ | - | - | ------------ | ----- | - | ----- | ------ | ------ | - | - | ------- | -------- | -
|                                                                                      |                                                                                                         |        |         | Guarantor |              |   | Nonguarantor |              |   |   |              |      
|                                                                                      |                                                                                                         | Parent |         |           | Subsidiaries |   |              | Subsidiaries |   |   | Eliminations |       |   | Total |       
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|Net sales                                                                             |                                                                                                         | $      | 61.0    |           |              | $ | 330.3        |              |   | $ | 307.0        |       |   | $     | (8.5   | )      |   | $ | 689.8   |         
|Cost of goods sold                                                                    |                                                                                                         |        | 61.3    |           |              |   | 297.6        |              |   |   | 260.9        |       |   |       | (8.5   | )      |   |   | 611.3   |         
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|Gross profit (loss)                                                                   |                                                                                                         |        | (0.3    | )         |              |   | 32.7         |              |   |   | 46.1         |       |   |       |       |        |   |   | 78.5    |         
|Marketing, general and administration                                                 |                                                                                                         |        | 5.5     |           |              |   | 19.1         |              |   |   | 18.5         |       |   |       | (1.5   | )      |   |   | 41.6    |         
|Amortization of intangibles assets                                                    |                                                                                                         |        | 0.1     |           |              |   | 0.8          |              |   |   | 0.7          |       |   |       |       |        |   |   | 1.6     |         
|Equity in (earnings) losses of subsidiaries                                           |                                                                                                         |        | (132.1  | )         |              |   | (7.9         | )            |   |   | (0.1         | )     |   |       | 140.1  |        |   |   |        |         
|Asset impairments and other
    restructuring charges                                 |                                                                                                         |        | 0.3     |           |              |   | 4.9          |              |   |   | 1.2          |       |   |       |       |        |   |   | 6.4     |         
|Other expense (income), net                                                           |                                                                                                         |        | (0.4    | )         |              |   | (2.2         | )            |   |   | (1.7         | )     |   |       | 0.8    |        |   |   | (3.5    | )       
|Frest start accounting adjustments                                                    |                                                                                                         |        |        |           |              |   | 253.4        |              |   |   | (316.5       | )     |   |       |       |        |   |   | (63.1   | )       
|Reorganization items                                                                  |                                                                                                         |        | 13.3    |           |              |   | 31.7         |              |   |   |             |       |   |       |       |        |   |   | 45.0    |         
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|                                                                                      | Earnings (loss) from operations                                                                         |        |         | 113.0     |              |   |              | (267.1       | ) |   |              | 344.0 |   |       |        | (139.4 | ) |   |         | 50.5     |  
|Interest expense, net                                                                 |                                                                                                         |        | 2.8     |           |              |   | 16.4         |              |   |   | 3.5          |       |   |       |       |        |   |   | 22.7    |         
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|                                                                                      | Earnings (loss) before taxes on income, minority
    interest, and extraordinary gain on debt discharge |        |         | 110.2     |              |   |              | (283.5       | ) |   |              | 340.5 |   |       |        | (139.4 | ) |   |         | 27.8     |  
|Income tax provision (benefit)                                                        |                                                                                                         |        | (0.3    | )         |              |   | 7.4          |              |   |   | 53.2         |       |   |       |       |        |   |   | 60.3    |         
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|Earnings (loss) before minority interest and
    extraordinary gain on debt discharge |                                                                                                         |        | 110.5   |           |              |   | (290.9       | )            |   |   | 287.3        |       |   |       | (139.4 | )      |   |   | (32.5   | )       
|Minority interest                                                                     |                                                                                                         |        |        |           |              |   |             |              |   |   | 1.2          |       |   |       |       |        |   |   | 1.2     |         
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|                                                                                      | Earnings (loss) before extraordinary gain on debt
    discharge                                         |        |         | 110.5     |              |   |              | (290.9       | ) |   |              | 286.1 |   |       |        | (139.4 | ) |   |         | (33.7    | )
|                                                                                      | Extraordinary gain on debt discharge                                                                    |        |         | (932.5    | )            |   |              | (142.9       | ) |   |              | (1.3  | ) |       |        |       |   |   |         | (1,076.7 | )
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       
|Net income (loss)                                                                     |                                                                                                         | $      | 1,043.0 |           |              | $ | (148.0       | )            |   | $ | 287.4        |       |   | $     | (139.4 | )      |   | $ | 1,043.0 |         
|                                                                                      |                                                                                                         |        |         |           |              |   |              |              |   |   |              |       |   |       |       

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

For the Year Ended January 31,
2003

|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |        |       |       |   |         |       |      |  
|------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------ | --------- | ------------ | - | ------------ | ------------ | ---- | - | ------------ | ---- | ---- | ----- | ------ | ----- | ----- | - | ------- | ----- | ---- | -
|                                                                               |                                                                                                                        |                                 |        | Guarantor |              |   | Nonguarantor |              |      |   |              |     
|                                                                               |                                                                                                                        | Parent                          |        |           | Subsidiaries |   |              | Subsidiaries |      |   | Eliminations |      |      | Total |       
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|Net sales                                                                      |                                                                                                                        | $                               | 234.9  |           |              | $ | 979.5        |              |      | $ | 818.0        |      |      | $     | (30.8  | )     |       | $ | 2,001.6 |      
|Cost of goods sold                                                             |                                                                                                                        |                                 | 233.8  |           |              |   | 902.6        |              |      |   | 688.3        |      |      |       | (30.8  | )     |       |   | 1,793.9 |      
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|Gross profit                                                                   |                                                                                                                        |                                 | 1.1    |           |              |   | 76.9         |              |      |   | 129.7        |      |      |       |       |       |       |   | 207.7   |      
|Marketing, general and administration                                          |                                                                                                                        |                                 | 24.2   |           |              |   | 53.7         |              |      |   | 45.6         |      |      |       |       |       |       |   | 123.5   |      
|Amortization of intangibles assets                                             |                                                                                                                        |                                 |       |           |              |   | 2.3          |              |      |   | 1.0          |      |      |       |       |       |       |   | 3.3     |      
|Equity in (earnings) losses of subsidiaries                                    |                                                                                                                        |                                 | 560.8  |           |              |   | (13.5        | )            |      |   | (2.2         | )    |      |       | (545.1 | )     |       |   |        |      
|Asset impairments and other restructuring charges                              |                                                                                                                        |                                 | 6.0    |           |              |   | 33.2         |              |      |   | 4.3          |      |      |       |       |       |       |   | 43.5    |      
|Other expense (income), net                                                    |                                                                                                                        |                                 | 6.3    |           |              |   | (6.2         | )            |      |   | (6.9         | )    |      |       |       |       |       |   | (6.8    | )    
|Reorganization items                                                           |                                                                                                                        |                                 | 35.9   |           |              |   | 8.6          |              |      |   |             |      |      |       |       |       |       |   | 44.5    |      
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|                                                                               |                                                                                                                        | Earnings (loss) from operations |        |           | (632.1       | ) |              |              | (1.2 | ) |              |      | 87.9 |       |        |       | 545.1 |   |         |       | (0.3 | )
|Interest expense, net                                                          |                                                                                                                        |                                 | 9.1    |           |              |   | 41.4         |              |      |   | 22.2         |      |      |       |       |       |       |   | 72.7    |      
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|                                                                               | Earnings (loss) before taxes on income, minority
    interest, and cumulative effect of change in accounting principle |                                 |        | (641.2    | )            |   |              | (42.6        | )    |   |              | 65.7 |      |       |        | 545.1 |       |   |         | (73.0 | )   
|Income tax provision (benefit)                                                 |                                                                                                                        |                                 | (29.4  | )         |              |   | 2.0          |              |      |   | 31.0         |      |      |       |       |       |       |   | 3.6     |      
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|                                                                               | Earnings (loss) before minority interest and
    cumulative effect of change in accounting principle                   |                                 |        | (611.8    | )            |   |              | (44.6        | )    |   |              | 34.7 |      |       |        | 545.1 |       |   |         | (76.6 | )   
|Minority interest                                                              |                                                                                                                        |                                 |       |           |              |   |             |              |      |   | 3.5          |      |      |       |       |       |       |   | 3.5     |      
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|Earnings (loss) before cumulative effect of
    change in accounting principle |                                                                                                                        |                                 | (611.8 | )         |              |   | (44.6        | )            |      |   | 31.2         |      |      |       | 545.1  |       |       |   | (80.1   | )    
|Cumulative effect of change in accounting
    principle, net of tax            |                                                                                                                        |                                 | 22.7   |           |              |   | 498.5        |              |      |   | 33.2         |      |      |       |       |       |       |   | 554.4   |      
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       
|Net income (loss)                                                              |                                                                                                                        | $                               | (634.5 | )         |              | $ | (543.1       | )            |      | $ | (2.0         | )    |      | $     | 545.1  |       |       | $ | (634.5  | )    
|                                                                               |                                                                                                                        |                                 |        |           |              |   |              |              |      |   |              |      |      |       |       

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

For the Year Ended January 31,
2002


|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |        |       |       |   |         |        |        |  
|------------------------------------------------------------------ | ---------------------------------------------------------------- | ------------------------------- | ------ | --------- | ------------ | - | ------------ | ------------ | ------ | - | ------------ | ---- | ---- | ----- | ------ | ----- | ----- | - | ------- | ------ | ------ | -
|                                                                   |                                                                  |                                 |        | Guarantor |              |   | Nonguarantor |              |        |   |              |     
|                                                                   |                                                                  | Parent                          |        |           | Subsidiaries |   |              | Subsidiaries |        |   | Eliminations |      |      | Total |       
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       
|Net sales                                                          |                                                                  | $                               | 252.5  |           |              | $ | 1,009.3      |              |        | $ | 787.0        |      |      | $     | (9.7   | )     |       | $ | 2,039.1 |       
|Cost of goods sold                                                 |                                                                  |                                 | 239.3  |           |              |   | 1,009.9      |              |        |   | 667.9        |      |      |       | (9.7   | )     |       |   | 1,907.4 |       
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       
|Gross profit                                                       |                                                                  |                                 | 13.2   |           |              |   | (0.6         | )            |        |   | 119.1        |      |      |       |       |       |       |   | 131.7   |       
|Marketing, general and administration                              |                                                                  |                                 | 19.4   |           |              |   | 51.5         |              |        |   | 51.4         |      |      |       |       |       |       |   | 122.3   |       
|Amortization of intangibles assets                                 |                                                                  |                                 | 1.2    |           |              |   | 18.4         |              |        |   | 6.8          |      |      |       |       |       |       |   | 26.4    |       
|Equity in (earnings) losses of joint ventures and
    subsidiaries |                                                                  |                                 | 273.0  |           |              |   | 61.1         |              |        |   | (0.1         | )    |      |       | (333.1 | )     |       |   | 0.9     |       
|Asset impairments and other restructuring charges                  |                                                                  |                                 | 9.9    |           |              |   | 107.8        |              |        |   | 23.9         |      |      |       |       |       |       |   | 141.6   |       
|Loss on investment in joint venture                                |                                                                  |                                 | 3.8    |           |              |   |             |              |        |   |             |      |      |       |       |       |       |   | 3.8     |       
|Other expense (income), net                                        |                                                                  |                                 | (0.9   | )         |              |   | (0.5         | )            |        |   | 0.9          |      |      |       |       |       |       |   | (0.5    | )     
|Reorganization items                                               |                                                                  |                                 | 47.8   |           |              |   |             |              |        |   |             |      |      |       |       |       |       |   | 47.8    |       
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       
|                                                                   |                                                                  | Earnings (loss) from operations |        |           | (341.0       | ) |              |              | (238.9 | ) |              |      | 36.2 |       |        |       | 333.1 |   |         |        | (210.6 | )
|Interest expense, net                                              |                                                                  |                                 | 59.3   |           |              |   | 86.9         |              |        |   | 29.0         |      |      |       |       |       |       |   | 175.2   |       
|Gain on early extinguishment of debt                               |                                                                  |                                 | (4.2   | )         |              |   |             |              |        |   |             |      |      |       |       |       |       |   | (4.2    | )     
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       
|                                                                   | Earnings (loss) before taxes on income and
    minority interest |                                 |        | (396.1    | )            |   |              | (325.8       | )      |   |              | 7.2  |      |       |        | 333.1 |       |   |         | (381.6 | )     
|Income tax provision                                               |                                                                  |                                 | 0.6    |           |              |   | 2.4          |              |        |   | 8.8          |      |      |       |       |       |       |   | 11.8    |       
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       
|                                                                   | Earnings (loss) before minority interest                         |                                 |        | (396.7    | )            |   |              | (328.2       | )      |   |              | (1.6 | )    |       |        | 333.1 |       |   |         | (393.4 | )     
|Minority interest                                                  |                                                                  |                                 |       |           |              |   |             |              |        |   | 3.3          |      |      |       |       |       |       |   | 3.3     |       
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       
|Net income (loss)                                                  |                                                                  | $                               | (396.7 | )         |              | $ | (328.2       | )            |        | $ | (4.9         | )    |      | $     | 333.1  |       |       | $ | (396.7  | )     
|                                                                   |                                                                  |                                 |        |           |              |   |              |              |        |   |              |      |      |       |       

F-56



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING BALANCE
SHEETS

As of January 31, 2004

|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |   |          |          |   |   |       |         | 
|--------------------------------------------- | ------------------------------------------ | --------------------- | ----- | ----- | ------ | --------- | ------- | ------------ | ------------ | - | ------------ | ----- |  | ------------ | ----- | ------- | ----- | - | -------- | -------- | - | - | ----- | ------- | 
|                                              |                                            |                       |       |       |        | Guarantor |         |              | Nonguarantor |   |              |       |  |             
|                                              |                                            | Parent                |       |       | Issuer |           |         | Subsidiaries |              |   | Subsidiaries |       |  | Eliminations |       |         | Total |  
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|                                              |                                            |                      
|                                              |                                            | (Millions of dollars) |      
|Cash and cash equivalents                     |                                            | $                     |      |       |        | $         | (3.2    | )            |              | $ | (0.6         | )     |  | $            | 52.3  |         |       | $ |         |          |   | $ | 48.5  |        
|Receivables                                   |                                            |                       |      |       |        |           | 1.2     |              |              |   | 132.0        |       |  |              | 191.2 |         |       |   |         |          |   |   | 324.4 |        
|Inventories                                   |                                            |                       |      |       |        |           | 5.7     |              |              |   | 86.5         |       |  |              | 97.1  |         |       |   |         |          |   |   | 189.3 |        
|Prepaid expenses and other                    |                                            |                       |      |       |        |           | 6.8     |              |              |   | 8.9          |       |  |              | 13.3  |         |       |   |         |          |   |   | 29.0  |        
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|Total current assets                          |                                            |                       |      |       |        |           | 10.5    |              |              |   | 226.8        |       |  |              | 353.9 |         |       |   |         |          |   |   | 591.2 |        
|Net property, plant and equipment             |                                            |                       |      |       |        |           | 36.6    |              |              |   | 355.5        |       |  |              | 574.4 |         |       |   |         |          |   |   | 966.5 |        
|Goodwill and other assets                     |                                            |                       | 604.1 |       |        |           | 1,290.7 |              |              |   | 83.3         |       |  |              | 618.9 |         |       |   | (1,858.1 | )        |   |   | 738.9 |        
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|                                              | Total assets                               |                       | $     | 604.1 |        |           | $       | 1,337.8      |              |   | $            | 665.6 |  |              | $     | 1,547.2 |       |   | $        | (1,858.1 | ) |   | $     | 2,296.6 | 
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|Bank borrowings and other notes               |                                            | $                     |      |       |        | $         |        |              |              | $ |             |       |  | $            | 14.2  |         |       | $ |         |          |   | $ | 14.2  |        
|Current portion of long-term debt             |                                            |                       |      |       |        |           | 4.5     |              |              |   |             |       |  |              | 6.8   |         |       |   |         |          |   |   | 11.3  |        
|Accounts payable and accrued liabilities      |                                            |                       |      |       |        |           | 83.3    |              |              |   | 82.7         |       |  |              | 188.4 |         |       |   |         |          |   |   | 354.4 |        
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|                                              | Total current liabilities                  |                       |       |      |        |           |         | 87.8         |              |   |              | 82.7  |  |              |       | 209.4   |       |   |          |         |   |   |       | 379.9   | 
|Long-term debt, net of current portion        |                                            |                       |      |       |        |           | 714.3   |              |              |   | 8.4          |       |  |              | 29.7  |         |       |   |         |          |   |   | 752.4 |        
|Deferred tax liabilities                      |                                            |                       |      |       |        |           |        |              |              |   |             |       |  |              | 98.5  |         |       |   |         |          |   |   | 98.5  |        
|Pension and other long-term liabilities       |                                            |                       |      |       |        |           | 263.1   |              |              |   | 0.4          |       |  |              | 164.5 |         |       |   |         |          |   |   | 428.0 |        
|Series A warrants and Series B warrants       |                                            |                       | 8.2   |       |        |           |        |              |              |   |             |       |  |              |      |         |       |   |         |          |   |   | 8.2   |        
|Redeemable preferred stock of subsidiaries    |                                            |                       |      |       |        |           | 10.5    |              |              |   |             |       |  |              |      |         |       |   |         |          |   |   | 10.5  |        
|Minority interest                             |                                            |                       |      |       |        |           |        |              |              |   |             |       |  |              | 23.2  |         |       |   |         |          |   |   | 23.2  |        
|Parents loans                                 |                                            |                       |      |       |        |           | (293.3  | )            |              |   | (24.5        | )     |  |              | 315.4 |         |       |   | 2.4      |          |   |   |      |        
|Common stock                                  |                                            |                       | 0.3   |       |        |           |        |              |              |   |             |       |  |              |      |         |       |   |         |          |   |   | 0.3   |        
|Additional paid-in capital                    |                                            |                       | 548.2 |       |        |           | 540.9   |              |              |   | 652.3        |       |  |              | 626.6 |         |       |   | (1,819.8 | )        |   |   | 548.2 |        
|Retained earnings (accumulated deficit)       |                                            |                       | (46.5 | )     |        |           | (16.8   | )            |              |   | (53.5        | )     |  |              | 21.6  |         |       |   | 48.7     |          |   |   | (46.5 | )      
|Accumulated other comprehensive income (loss) |                                            |                       | 93.9  |       |        |           | 31.3    |              |              |   | (0.2         | )     |  |              | 58.3  |         |       |   | (89.4    | )        |   |   | 93.9  |        
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|                                              | Total stockholders equity                 |                       |       | 595.9 |        |           |         | 555.4        |              |   |              | 598.6 |  |              |       | 706.5   |       |   |          | (1,860.5 | ) |   |       | 595.9   | 
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  
|                                              | Total liabilities and stockholders equity |                       | $     | 604.1 |        |           | $       | 1,337.8      |              |   | $            | 665.6 |  |              | $     | 1,547.2 |       |   | $        | (1,858.1 | ) |   | $     | 2,296.6 | 
|                                              |                                            |                       |       |       |        |           |         |              |              |   |              |       |  |              |       |         |       |  

F-57



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING BALANCE
SHEETS

As of January 31, 2003


|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |          |       |        |   |          |       |         | 
|-------------------------------------------------------- | ------------------------- | ------------ | -------- | --------- | ------------ | - | ------------ | ------------ | ----- | - | ------------ | ----- | ------- | ----- | -------- | ----- | ------ | - | -------- | ----- | ------- | 
|                                                         |                           |              |          | Guarantor |              |   | Nonguarantor |              |       |   |              |      
|                                                         |                           | Parent       |          |           | Subsidiaries |   |              | Subsidiaries |       |   | Eliminations |       |         | Total |         
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|Cash and cash equivalents                                |                           | $            | 13.3     |           |              | $ |             |              |       | $ | 52.8         |       |         | $     |         |       |        | $ | 66.1     |      
|Receivables                                              |                           |              | 29.9     |           |              |   | 98.9         |              |       |   | 147.8        |       |         |       |         |       |        |   | 276.6    |      
|Inventories                                              |                           |              | 26.1     |           |              |   | 72.2         |              |       |   | 78.3         |       |         |       |         |       |        |   | 176.6    |      
|Prepaid expenses and other                               |                           |              | 4.9      |           |              |   | 20.7         |              |       |   | 6.9          |       |         |       |         |       |        |   | 32.5     |      
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|Total current assets                                     |                           |              | 74.2     |           |              |   | 191.8        |              |       |   | 285.8        |       |         |       |         |       |        |   | 551.8    |      
|Net property, plant and equipment                        |                           |              | 111.5    |           |              |   | 393.2        |              |       |   | 446.5        |       |         |       |         |       |        |   | 951.2    |      
|Goodwill and other assets                                |                           |              | 378.5    |           |              |   | 172.4        |              |       |   | 269.3        |       |         |       | (476.6   | )     |        |   | 343.6    |      
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|                                                         |                           | Total assets |          | $         | 564.2        |   |              | $            | 757.4 |   |              | $     | 1,001.6 |       |          | $     | (476.6 | ) |          | $     | 1,846.6 | 
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|DIP facility                                             |                           | $            | 49.9     |           |              | $ |             |              |       | $ |             |       |         |       |          |       |        | $ | 49.9     |      
|Bank borrowings and other notes                          |                           |              |         |           |              |   | 2.0          |              |       |   | 13.8         |       |         |       |         |       |        |   | 15.8     |      
|Current portion of long-term debt                        |                           |              |         |           |              |   |             |              |       |   | 40.1         |       |         |       |         |       |        |   | 40.1     |      
|Accounts payable and accrued liabilities                 |                           |              | 58.9     |           |              |   | 59.1         |              |       |   | 172.0        |       |         |       | (21.3    | )     |        |   | 268.7    |      
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|                                                         | Total current liabilities |              |          | 108.8     |              |   |              | 61.1         |       |   |              | 225.9 |         |       |          | (21.3 | )      |   |          | 374.5 |        
|Long-term debt, net of current portion                   |                           |              |         |           |              |   |             |              |       |   | 61.9         |       |         |       |         |       |        |   | 61.9     |      
|Deferred tax liabilities                                 |                           |              | 1.0      |           |              |   | 4.5          |              |       |   | 47.7         |       |         |       |         |       |        |   | 53.2     |      
|Pension and other long-term liabilities                  |                           |              | 105.2    |           |              |   | 47.2         |              |       |   | 128.8        |       |         |       |         |       |        |   | 281.2    |      
|Minority interest                                        |                           |              |         |           |              |   |             |              |       |   | 16.4         |       |         |       |         |       |        |   | 16.4     |      
|Parents loans                                            |                           |              | (598.2   | )         |              |   | 411.3        |              |       |   | 186.9        |       |         |       |         |       |        |   |         |      
|Liabilities subject to compromise                        |                           |              | 2,021.8  |           |              |   | 110.5        |              |       |   | 1.5          |       |         |       |         |       |        |   | 2,133.8  |      
|Common stock                                             |                           |              | 0.3      |           |              |   |             |              |       |   |             |       |         |       |         |       |        |   | 0.3      |      
|Additional paid-in capital                               |                           |              | 235.1    |           |              |   | 1,144.9      |              |       |   | 328.3        |       |         |       | (1,473.2 | )     |        |   | 235.1    |      
|Common stock in treasury at cost                         |                           |              | (25.7    | )         |              |   |             |              |       |   |             |       |         |       |         |       |        |   | (25.7    | )    
|Retained earnings (accumulated deficit)                  |                           |              | (1,176.9 | )         |              |   | (951.9       | )            |       |   | 67.8         |       |         |       | 884.1    |       |        |   | (1,176.9 | )    
|Accumulated other comprehensive loss                     |                           |              | (107.2   | )         |              |   | (70.2        | )            |       |   | (63.6        | )     |         |       | 133.8    |       |        |   | (107.2   | )    
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|Total stockholders equity (deficit)                     |                           |              | (1,074.4 | )         |              |   | 122.8        |              |       |   | 332.5        |       |         |       | (455.3   | )     |        |   | (1,074.4 | )    
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         
|Total liabilities and stockholders equity
    (deficit) |                           | $            | 564.2    |           |              | $ | 757.4        |              |       | $ | 1,001.6      |       |         | $     | (476.6   | )     |        | $ | 1,846.6  |      
|                                                         |                           |              |          |           |              |   |              |              |       |   |              |       |         |       |         

F-58



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

For the Eight Months Ended January 31,
2004

|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |   |   |   |   |   |       |        |        |  
|---------------------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------- | ----- | - | ------ | --------- | ----- | ------------ | ------------ | - | ------------ | ----- | ----- | ------------ | ----- | ----- | ----- | - | - | - | - | - | ----- | ------ | ------ | -
|                                                           |                                                                          |                                                          |       |   |        | Guarantor |       |              | Nonguarantor |   |              |       |       |             
|                                                           |                                                                          | Parent                                                   |       |   | Issuer |           |       | Subsidiaries |              |   | Subsidiaries |       |       | Eliminations |       | Total |      
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |      
|                                                           |                                                                          |                                                         
|                                                           |                                                                          | (Millions of dollars)                                    |      
|Cash flows provided by (used for) operating
    activities |                                                                          | $                                                        | (47.6 | ) |        | $         | (26.1 | )            |              | $ | 33.1         |       |       | $            | 124.5 |       |       | $ |  |   |   | $ | 83.9  |       
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  
|Cash flows from investing activities:                      |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |   |   |   |   |   |       |       
|                                                           | Acquisition of property, plant, equipment, and
    tooling               |                                                          |       |  |        |           |       | (7.7         | )            |   |              | (47.6 | )     |              |       | (51.4 | )     |   |   |  |   |   |       | (106.7 | )     
|                                                           | Proceeds from sale of non-core businesses                                |                                                          |       |  |        |           |       | 1.1          |              |   |              | 0.5   |       |              |       | 3.1   |       |   |   |  |   |   |       | 4.7    |       
|                                                           | Purchase of businesses                                                   |                                                          |       |  |        |           |       |             |              |   |              |      |       |              |       | (19.8 | )     |   |   |  |   |   |       | (19.8  | )     
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  
|                                                           |                                                                          | Cash used for investing activities                       |       |   |       |           |       |              | (6.6         | ) |              |       | (47.1 | )            |       |       | (68.1 | ) |   |   |  |   |       |        | (121.8 | )
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  
|Cash flows from financing activities:                      |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |   |   |   |   |   |       |       
|                                                           | Changes in bank borrowings and credit facilities                         |                                                          |       |  |        |           |       |             |              |   |              |      |       |              |       | (16.0 | )     |   |   |  |   |   |       | (16.0  | )     
|                                                           | Repayment of bank borrowings, revolving facility,
    and long term debt |                                                          |       |  |        |           |       | (2.2         | )            |   |              |      |       |              |       | (81.7 | )     |   |   |  |   |   |       | (83.9  | )     
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  
|Cash used for financing activities                         |                                                                          |                                                          |      |   |        |           | (2.2  | )            |              |   |             |       |       |              | (97.7 | )     |       |   |  |   |   |   | (99.9 | )     
|Increase (decrease) in parent loans and
    advances       |                                                                          |                                                          | 47.6  |   |        |           | (76.3 | )            |              |   | 13.7         |       |       |              | 15.0  |       |       |   |  |   |   |   |      |       
|Effect of exchange rates of cash and cash
    equivalents  |                                                                          |                                                          |      |   |        |           |      |              |              |   |             |       |       |              | 7.2   |       |       |   |  |   |   |   | 7.2   |       
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  
|                                                           |                                                                          | Net increase (decrease) in cash and cash
    equivalents |       |   |       |           |       |              | (111.2       | ) |              |       | (0.3  | )            |       |       | (19.1 | ) |   |   |  |   |       |        | (130.6 | )
|Cash and cash equivalents at beginning of period           |                                                                          |                                                          |      |   |        |           | 108.0 |              |              |   | (0.3         | )     |       |              | 71.4  |       |       |   |  |   |   |   | 179.1 |       
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  
|Cash and cash equivalents at end of period                 |                                                                          | $                                                        |      |   |        | $         | (3.2  | )            |              | $ | (0.6         | )     |       | $            | 52.3  |       |       | $ |  |   |   | $ | 48.5  |       
|                                                           |                                                                          |                                                          |       |   |        |           |       |              |              |   |              |       |       |              |       |       |       |  

F-59



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

Predecessor Company


For the Four Months ended May 31,
2003

|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |   |   |   |   |       |        |       |  
|---------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------ | ----- | --------- | ------------ | - | ------------ | ------------ | ----- | - | ------------ | ---- | ----- | - | - | - | - | - | ----- | ------ | ----- | -
|                                                           |                                                                                 |                                                  |       | Guarantor |              |   | Nonguarantor |              |       |   |              |     
|                                                           |                                                                                 | Parent                                           |       |           | Subsidiaries |   |              | Subsidiaries |       |   | Eliminations |      | Total |  
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |  
|Cash flows provided by (used for) operating
    activities |                                                                                 | $                                                | (7.5  | )         |              | $ | 14.7         |              |       | $ | 23.9         |      |       | $ |  |   |   | $ | 31.1  |       
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  
|Cash flows from investing activities:                      |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |   |   |   |   |       |       
|                                                           | Acquisition of property, plant, equipment, and
    tooling                      |                                                  |       | (24.9     | )            |   |              | (15.4        | )     |   |              | (9.6 | )     |   |   |  |   |   |       | (49.9  | )    
|                                                           | Proceeds from sale of non-core businesses                                       |                                                  |       |          |              |   |              | 0.5          |       |   |              | 0.3  |       |   |   |  |   |   |       | 0.8    |      
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  
|                                                           |                                                                                 | Cash used for investing activities               |       |           | (24.9        | ) |              |              | (14.9 | ) |              |      | (9.3  | ) |   |   |  |   |       |        | (49.1 | )
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  
|Cash flows from financing activities:                      |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |   |   |   |   |       |       
|                                                           | Changes in bank borrowings, credit facilities,
    DIP facility and other notes |                                                  |       | (59.7     | )            |   |              | (2.0         | )     |   |              |     |       |   |   |  |   |   |       | (61.7  | )    
|                                                           | Proceeds from debt issuance                                                     |                                                  |       | 678.9     |              |   |              |             |       |   |              |     |       |   |   |  |   |   |       | 678.9  |      
|                                                           | Prepetition lenders payment                                                    |                                                  |       | (477.3    | )            |   |              |             |       |   |              |     |       |   |   |  |   |   |       | (477.3 | )    
|                                                           | Payment to holders of Old Senior Notes                                          |                                                  |       | (13.0     | )            |   |              |             |       |   |              |     |       |   |   |  |   |   |       | (13.0  | )    
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  
|                                                           |                                                                                 | Cash provided by (used for) financing activities |       |           | 128.9        |   |              |              | (2.0  | ) |              |      |      |   |   |   |  |   |       |        | 126.9 |  
|Increase (decrease) in parent loans and
    advances       |                                                                                 |                                                  | (1.9  | )         |              |   | 2.2          |              |       |   | (0.3         | )    |       |   |  |   |   |   |      |       
|Effect of exchange rates of cash and cash
    equivalents  |                                                                                 |                                                  |      |           |              |   |             |              |       |   | 4.1          |      |       |   |  |   |   |   | 4.1   |       
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  
|                                                           | Net increase (decrease) in cash and cash
    equivalents                        |                                                  |       | 94.6      |              |   |              |             |       |   |              | 18.4 |       |   |   |  |   |   |       | 113.0  |      
|Cash and cash equivalents at beginning of period           |                                                                                 |                                                  | 13.3  |           |              |   |             |              |       |   | 52.8         |      |       |   |  |   |   |   | 66.1  |       
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  
|Cash and cash equivalents at end of period                 |                                                                                 | $                                                | 107.9 |           |              | $ |             |              |       | $ | 71.2         |      |       | $ |  |   |   | $ | 179.1 |       
|                                                           |                                                                                 |                                                  |       |           |              |   |              |              |       |   |              |      |       |   |  

F-60



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

For the Year Ended January 31, 2003


|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |   |   |   |   |       |        |        |      | 
|---------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------- | -------------------------------------------------------- | --------- | ------------ | --- | ------------ | ------------ | ----- | ---- | ------------ | ----- | ----- | ---- | - | - | - | - | ----- | ------ | ------ | ---- | 
|                                                           |                                                            |                                    |                                                          | Guarantor |              |     | Nonguarantor |              |       |      |              |      
|                                                           |                                                            | Parent                             |                                                          |           | Subsidiaries |     |              | Subsidiaries |       |      | Eliminations |       | Total |     
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |     
|Cash flows provided by (used for) operating
    activities |                                                            | $                                  | (8.2                                                     | )         |              | $   | 9.9          |              |       | $    | 104.0        |       |       | $    |  |   |   | $ | 105.7 |       
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  
|Cash flows from investing activities:                      |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |   |   |   |   |       |       
|                                                           | Acquisition of property, plant, equipment, and
    tooling |                                    |                                                          | (12.2     | )            |     |              | (49.0        | )     |      |              | (45.6 | )     |      |   |  |   |   |       | (106.8 | )     
|                                                           | Proceeds from sale of non-core businesses                  |                                    |                                                          |          |              |     |              | (1.2         | )     |      |              | 3.6   |       |      |   |  |   |   |       | 2.4    |       
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  
|                                                           |                                                            | Cash used for investing activities |                                                          |           | (12.2        | )   |              |              | (50.2 | )    |              |       | (42.0 | )    |   |   |  |   |       |        | (104.4 | )   
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  
|Cash flows from financing activities:                      |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |   |   |   |   |       |       
|                                                           | Changes in bank borrowings and credit facilities           |                                    |                                                          | 48.9      |              |     |              | 1.0          |       |      |              | (35.4 | )     |      |   |  |   |   |       | 14.5   |       
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  
|                                                           | Cash provided by (used for) financing activities           |                                    |                                                          | 48.9      |              |     |              | 1.0          |       |      |              | (35.4 | )     |      |   |  |   |   |       | 14.5   |       
|Increase (decrease) in parent loans and advances           |                                                            |                                    | (26.5                                                    | )         |              |     | 38.9         |              |       |      | (12.4        | )     |       |      |  |   |   |   |      |       
|Effect of exchange rates of cash and cash
    equivalents  |                                                            |                                    |                                                         |           |              |     |             |              |       |      | 5.1          |       |       |      |  |   |   |   | 5.1   |       
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  
|                                                           |                                                            |                                    | Net increase (decrease) in cash and cash
    equivalents |           |              | 2.0 |              |              |       | (0.4 | )            |       |       | 19.3 |   |   |   |  |       |        |        | 20.9 | 
|Cash and cash equivalents at beginning of period           |                                                            |                                    | 11.3                                                     |           |              |     | 0.4          |              |       |      | 33.5         |       |       |      |  |   |   |   | 45.2  |       
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  
|Cash and cash equivalents at end of period                 |                                                            | $                                  | 13.3                                                     |           |              | $   |             |              |       | $    | 52.8         |       |       | $    |  |   |   | $ | 66.1  |       
|                                                           |                                                            |                                    |                                                          |           |              |     |              |              |       |      |              |       |       |      |  

F-61



---



##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

For the Year Ended January 31,
2002


|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |   |   |   |   |        |        |       |  
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------ | --------- | ------------ | - | ------------ | ------------ | ------ | - | ------------ | ----- | ----- | - | - | - | - | - | ------ | ------ | ----- | -
|                                                           |                                                                                           |                                                                   |        | Guarantor |              |   | Nonguarantor |              |        |   |              |      
|                                                           |                                                                                           | Parent                                                            |        |           | Subsidiaries |   |              | Subsidiaries |        |   | Eliminations |       | Total |  
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |  
|Cash flows provided by (used for) operating
    activities |                                                                                           | $                                                                 | 76.1   |           |              | $ | (171.8       | )            |        | $ | 93.8         |       |       | $ |  |   |   | $ | (1.9   | )     
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|Cash flows from investing activities:                      |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |   |   |   |   |        |       
|                                                           | Acquisition of property, plant, equipment, and
    tooling                                |                                                                   |        | (8.5      | )            |   |              | (60.2        | )      |   |              | (78.3 | )     |   |   |  |   |   |        | (147.0 | )    
|                                                           | Proceeds from sale of non-core businesses                                                 |                                                                   |        | 9.5       |              |   |              |             |        |   |              | 11.0  |       |   |   |  |   |   |        | 20.5   |      
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|Cash provided by (used for) investing activities           |                                                                                           |                                                                   | 1.0    |           |              |   | (60.2        | )            |        |   | (67.3        | )     |       |   |  |   |   |   | (126.5 | )     
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|Cash flows from financing activities:                      |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |   |   |   |   |        |       
|                                                           | Increase in bank borrowings, revolving facility,
    and DIP facility                     |                                                                   |        | 245.4     |              |   |              | (0.5         | )      |   |              | (5.4  | )     |   |   |  |   |   |        | 239.5  |      
|                                                           | Proceeds from refinancing, net of related fees                                            |                                                                   |        | 435.4     |              |   |              |             |        |   |              |      |       |   |   |  |   |   |        | 435.4  |      
|                                                           | Repayment of bank borrowings, revolving facility,
    and long term debt from refinancing |                                                                   |        | (370.9    | )            |   |              |             |        |   |              | (47.0 | )     |   |   |  |   |   |        | (417.9 | )    
|                                                           |                                                                                           | Net proceeds (payments) on accounts
    receivable securitization |        |           | 43.0         |   |              |              | (114.6 | ) |              |       |      |   |   |   |  |   |        |        | (71.6 | )
|                                                           | Capital contribution                                                                      |                                                                   |        | (25.0     | )            |   |              | (19.0        | )      |   |              | 44.0  |       |   |   |  |   |   |        |       |      
|                                                           | Fees to amend Credit Agreement and DIP facility                                           |                                                                   |        | (10.6     | )            |   |              |             |        |   |              |      |       |   |   |  |   |   |        | (10.6  | )    
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|                                                           | Cash provided by (used for) financing activities                                          |                                                                   |        | 317.3     |              |   |              | (134.1       | )      |   |              | (8.4  | )     |   |   |  |   |   |        | 174.8  |      
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|Increase (decrease) in parent loans and
    advances       |                                                                                           |                                                                   | (363.8 | )         |              |   | 364.4        |              |        |   | (0.6         | )     |       |   |  |   |   |   |       |       
|Effect of exchange rates of cash and cash
    equivalents  |                                                                                           |                                                                   |       |           |              |   |             |              |        |   | (1.2         | )     |       |   |  |   |   |   | (1.2   | )     
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|                                                           |                                                                                           | Net increase (decrease) in cash and cash
    equivalents          |        |           | 30.6         |   |              |              | (1.7   | ) |              |       | 16.3  |   |   |   |  |   |        |        | 45.2  |  
|Cash and cash equivalents at beginning of period           |                                                                                           |                                                                   | (19.3  | )         |              |   | 2.5          |              |        |   | 16.8         |       |       |   |  |   |   |   |       |       
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  
|Cash and cash equivalents at end of period                 |                                                                                           | $                                                                 | 11.3   |           |              | $ | 0.8          |              |        | $ | 33.1         |       |       | $ |  |   |   | $ | 45.2   |       
|                                                           |                                                                                           |                                                                   |        |           |              |   |              |              |        |   |              |       |       |   |  

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

|                            |                                 |                       |   |           |            |  |  |            |  |         |         |       |   |  |   |     | 
|--------------------------- | ------------------------------- | --------------------- | - | --------- | ---------- |  |  | ---------- |  | ------- | ------- | ----- | - |  | - | --- | 
|                            |                                 |                       |   | Additions |            |  |  |            | 
|                            |                                 | Balance at            |   |           | Charged to |  |  |            |  | Balance |        
|                            |                                 | Beginning             |   |           | Costs and  |  |  |            |  | at End  |        
|Description                 |                                 | of Year               |   |           | Expenses   |  |  | Deductions |  |         | of Year |      
|                            |                                 |                       |   |           |            |  |  |            |  |         |         |      
|                            |                                 |                      
|                            |                                 | (Millions of dollars) |  
|Year ended January 31, 2004 |                                 |                       |   |           |            |  |  |            |  |         |         |       |   |  |   |    
|                            | Allowance for doubtful accounts |                       | $ | 7.2       |            |  |  | 0.8        |  |         |         | (1.4  | ) |  | $ | 6.6 | 
|Year ended January 31, 2003 |                                 |                       |   |           |            |  |  |            |  |         |         |       |   |  |   |    
|                            | Allowance for doubtful accounts |                       | $ | 5.9       |            |  |  | 2.1        |  |         |         | (0.8  | ) |  | $ | 7.2 | 
|Year ended January 31, 2002 |                                 |                       |   |           |            |  |  |            |  |         |         |       |   |  |   |    
|                            | Allowance for doubtful accounts |                       | $ | 8.5       |            |  |  | 7.7        |  |         |         | (10.3 | ) |  | $ | 5.9 | 

F-63



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##### Table of Contents



EXHIBIT INDEX

|            |    |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------- | -- | -- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    |    | Description
|            |    |    |            
|            | 10 | .8 |             | Amendment No. 2 and Waiver to Credit
    Agreement, dated as of February 6, 2004, by and among HLI
    Operating Company, Inc., as Borrower, Hayes Lemmerz
    International, Inc. the Lenders and Issuers listed therein,
    Citicorp North America, Inc., as Administrative Agent,
    Lehman Commercial Paper, Inc., as Syndication Agent, and
    General Electric Capital Corporation, as Documentation Agent.*
|            | 12 |    |             | Computation of Ratio of Earnings to Fixed
    Charges.*                                                                                                                                                                                                                                                                                                                                                              
|            | 14 |    |             | Code of Ethics.*                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 18 |    |             | Preferability Letter of KPMG LLP.*                                                                                                                                                                                                                                                                                                                                                                                   
|            | 21 |    |             | Subsidiaries of the Company.*                                                                                                                                                                                                                                                                                                                                                                                        
|            | 23 |    |             | Consent of KPMG LLP.*                                                                                                                                                                                                                                                                                                                                                                                                
|            | 24 |    |             | Powers of Attorney.*                                                                                                                                                                                                                                                                                                                                                                                                 
|            | 31 | .1 |             | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                
|            | 31 | .2 |             | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                            
|            | 32 | .1 |             | Certification of Curtis J. Clawson, Chairman of
    the Board, President and Chief Executive Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                             
|            | 32 | .2 |             | Certification of James A. Yost, Vice President,
    Finance, and Chief Financial Officer, Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.*